The Bank of England (BOE) is expected to raise its interest rates for the fifth time in a row as it continues to work to fight inflation which is at a 40-year high.
At its May meeting, the bank had raised the rate by 25 basis points to a 13 -year high of 1.00%. However, the BOE also warned that the UK economy faces the risk of a recession.
Since then, the latest inflation data shows UK inflation almost registered a double -digit increase in April, with an increase of 9% on an annual basis. The central bank expects inflation to rise above 10% this year.
Moreover, economic growth also worsened the contraction recorded for two consecutive months. The UK’s Gross Domestic Product (GDP) declined 0.3% in April from a decline of 0.1% in the previous month.
This puts the BOE in a dilemma to tackle inflation or save the country from recession. However, rising energy prices and taxes in Britain are seen to continue to contribute to rising inflation.
The market now expects policymakers to raise the rate by 25 basis points to 1.25% and give a bleak view of the country’s economic growth.
Ahead of the BOE meeting, the pound reduced its previously earned gains to trade at around 1.2000 against the USD.
