The Bank of England decided on Thursday to raise interest rates by 50 basis points to 1.75%, which is the largest rate hike since 1995.
The decision came in line with the expectations of most investors and economists, who expected the Bank of England to raise the benchmark interest rate by half a percentage point to 1.75%, the highest level since late 2008 at the start of the global financial crisis.
Britain’s headline inflation has soared to 9.4%, and could reach 15% in early 2023 according to Resolution, as the fallout from Russia’s invasion of Ukraine combines with post-pandemic pressures on the global economy.
The Bank of England, which has already raised borrowing costs five times since December, said in June it would act aggressively if inflation pressures became more persistent.
Since then, the public’s inflation expectations have subsided a bit, and companies’ pricing plans have softened, which could give the MPC an argument to stick with quarter-point rate moves.
The pressure on Governor Andrew Bailey and his colleagues intensified after massive interest rate increases by the US Federal Reserve, the European Central Bank and other central banks, which weakened the value of the pound, which could lead to increased inflation.
