Bank of England raises interest rates three times amid inflation concerns

The Bank of England (BoE) approved three consecutive rate hikes on March 16 amid rising inflationary concerns.

It is the first time since 1997 that the central bank has raised interest rates three times in a row.

“The (bank’s) MPC (Monetary Policy Committee) sets monetary policy in a way that helps achieve the 2% inflation target and sustain growth and employment. Ended March 16, 2022. At the meeting, the MPC resolved with a majority of 8 to 1 to raise the bank rate by 0.25 percentage points to 0.75%. Some members preferred to keep the bank rate at 0.5%, “BoE said. Said on March 17th. news release..

According to the report, the rise of 0.25 percentage points is due to the ongoing signs of “tightness” in the labor market, “domestic cost and price pressure”, and the risk of continued such pressure. It was “justified”.

The bank said monetary policy could require further “moderate tightening” in the coming months. However, he admitted that there are “risks on both sides of that decision” depending on how inflation develops in the medium term.

In a February monetary policy report released before Russia invaded Ukraine, the MPC’s consumer price index (CPI) inflation peaked at around 7.25% by April this year, with GDP a year. ..

The upward pressure on inflation is expected to subside over time, with CPI inflation expected to be slightly above 2% in two years and “significantly” below that level in three years.

However, the Ukrainian aggression not only “accelerates” peak inflation, but can also put further pressure on household income, which negatively impacts economic activity. This situation has led to a “significant rise” in the prices of other commodities such as energy and food.

In the coming months, the bank said global inflationary pressures would be “strengthened”, adversely affecting countries that are net energy importers, including the United Kingdom. Britain’s economic growth is “likely to slow”, according to bank analysis.

“If sustained, the latest rise in energy futures prices could rise significantly again when the Ofgem (Office of Gas and Electricity Markets) utility price cap was reset in October 2022. This means that this could temporarily boost CPI inflation towards the end of the year, above what was previously expected to peak in April. “

In January 2022, the 12-month CPI inflation rate rose from 5.4% in December to 5.5%. The BoE now expects inflation to rise to about 8% in the second quarter and “probably even higher” by the end of the year.

Given BoE’s higher inflation expectations, double-digit inflation could be included in the card, said Paul Craig, portfolio manager at Quilter Investors. CNBC..

“The BoE had no choice but to keep raising rates. We are considering incorporating insurance in case economic growth slows or employment worsens than feared.” Stated.

“Global risks and the significant economic impact of the Russian-Ukraine war will make growth difficult, so the World Bank may need to turn around later this year.”

Naveen Athrappully


Naveen Athrappully is a news reporter on business and global events in The Epoch Times.