The British central bank announces its 11th consecutive rate hike as it focuses on fighting inflation.
The Bank of England (BoE) has raised interest rates by another quarter of a percentage point and says it expects the rise in UK inflation to cool faster than before, despite a surprise jump in price growth last month.
The central bank of the United Kingdom raised its benchmark interest rate by 25 basis points to 4.25 percent on Thursday. The BoE’s nine rate setters voted 7 to 2 in favor of the decision as they sounded more optimistic about the outlook for the country’s sluggish economy.
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That was the 11th consecutive increase in borrowing costs by the central bank, which began in December 2021.
The bank’s Monetary Policy Committee made the decision after Britain’s statistics agency surprised policymakers on Wednesday by reporting that inflation accelerated to 10.4 percent in February, driven by the cost of food, clothing and eating out.
The bank will continue to “closely monitor indications of continued inflationary pressures,” she said when announcing its decision. “If there were indications of continued pressure, further tightening of monetary policy would be necessary.”
Still, Thursday’s rate hike was the smallest since June, as the Bank of England forecasts a sharp drop in inflation later this year. Inflation is expected to slow to 2.9 percent by the end of the year as energy costs fall and the large price increases recorded last year are out of the equation.
Paul Brennan of Al Jazeera, reporting from London, said the BoE is no longer forecasting that the UK economy will slide into recession.
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“There’s an expectation that the economy will grow… something in the next year, a little glimmer of hope there,” Brennan said.
“They also expect energy prices or the contribution of energy prices to inflation to turn negative in the course of this year,” he said. “We have the war in Ukraine, which made the price of energy, namely Russian gas, rise because of its shortage. That is expected to be driven by inflationary pressures in the coming year, which will ease as people find alternatives.
“There are concerns as central banks around the world continue to try to curb inflation. It could spill over into broader recessionary pressures on the economy. So it is a very delicate balancing act that central banks are trying to enter.”