The Bank of England Monetary Policy Committee has decided to raise the bank reference rate by 25 basis points from 0.75 to 1 percent. The decision was made with six votes in favor and three against. It was since 2009 that the UK benchmark rate was not that high. “We have raised interest rates – writes the Bank of England – to help inflation return to our 2 percent target. Interest rates may need to be raised further in the coming months. But it all depends on what will happen in the economy ».
“We expect inflation to further increase to around 10% this year,” the Bank of England said in its statement announcing the bank’s benchmark rate hike to 1%. «It is probable – warns the central bank of the United Kingdom – that prices will rise faster than income for many people. This means that people will be able to buy less with their money. The UK economy is recovering from the effects of Covid but we expect the rising cost of living to lead to slower growth overall. “
The monetary authority explained that it expects a drop in inflation starting next year and an approximation to the 2% target in about two years.
The Bank of England cut its 2023 GDP estimate, forecasting a 0.25% decline from its previous 1.25% growth forecast. For 2024, on the other hand, growth is expected, but of 0.25% compared to the previous estimate of +1 per cent. At a press conference, Governor Andrew Bailey clarified that the forecasts represent a “very strong slowdown”, but not a technical recession.
