The Bank of England has raised interest rates by 25 basis points. This was revealed on Thursday by the Bank of England’s interest rate decision.
The key interest rate is now 0.75%. The decision was taken by 8 votes in favour and 1 vote against. One member opted to leave the interest rate undisturbed.
The Bank of England surprised the markets in December with an interest rate increase from 0.10 percentage points to 0.25 percent. In February, the central bank raised interest rates further to 0.50 percent. And for today, economists also expected an increase of 0.25 percentage points.
In February, the British central bank predicted that the Consumer Price Index would peak at around 7.25 percent in April, after which upward pressure was expected to subside over time and fall back to slightly above the 2 percent target in two years.
The war in Ukraine has led to further price increases for energy and other raw materials, the central bank noted, and is also likely to exacerbate global supply chain disruptions and significantly increase uncertainty about the economic outlook.
Inflationary pressures are expected to increase significantly in the coming months, while economic growth in countries that need to import energy on balance, such as the UK, is likely to slow.
According to the central bank, economic activity was stronger than expected in the past reporting period, with business confidence remaining at the same level and the labour market robust, but consumer confidence declined due to pressure on household purchasing power.
The British pound fell 0.2 percent against the dollar to 1.3123 shortly after the decision. The British ten-year interest rate fell to 1,550 percent.
The decline in the pound is the result of the Bank of England’s aggressive monetary policy. The market, in his opinion, believes that the central bank has taken a much too aggressive attitude.