The Bank of England (BoE) has decided to raise interest rates on Thursday as a framework to control inflation which continues to soar. Waima so with the economy affected by rising energy prices, the BoE is in no hurry to raise interest rates further.
Eight of the nine Monetary Policy Committees (MPCs) voted to raise the Bank Rate from 0.5% to 0.75% following the U.S. Federal Reserve’s decision early Thursday morning opting to raise interest rates for the first time since the Covid-19 outbreak.
Deputy Governor Jon Cunliffe voted to maintain rates, warning of a big impact on demand from higher commodity prices. Economists ’expectations were slightly misguided as they expected a unanimous vote for a higher rate.
The pound slipped nearly a cent against the U.S. dollar to a trading level of 1.3106 a 0.30% decline and British government bond prices soared as investors reduced their bets that the BoE would raise rates swiftly this year.
The BoE said inflation was set to reach around 8% in April nearly 1% higher than forecast last month. The BoE also warned that that inflation could soar.
Policymakers on Thursday rejected investors ’bets that bank rates would rise sharply to around 2% by the end of the year. "The committee is assessing that some further moderate tightening may be appropriate in the next few months but there are risks." said the BoE.
The BoE thinks the Russian -Ukrainian war conflict is likely to cause global inflationary pressures to strengthen significantly in the coming months and add to supply chain disruptions.
