The Bank of England raised its key interest rate to 2.25% from 1.75% in a bid to tame inflation, despite the economy likely entering recession. The move follows the U.S. Federal Reserve's decision to raise its rate
The BoE move follows the U.S. Federal Reserve's decision on Wednesday to raise its key rate by three quarters of a percentage point, as central banks worldwide grapple with post-COVID labour shortages and the impact of Russia's invasion of Ukraine on energy prices.
The BoE's Monetary Policy Committee voted 5-4 to raise rates to 2.25%, with Deputy Governor Dave Ramsden and external MPC members Jonathan Haskel and Catherine Mann voting for an increase to 2.5%, while new MPC member Swati Dhingra wanted a smaller rise to 2%. The BoE now expects inflation to peak at just under 11% in October, below the 13.3% peak it forecast last month, before Liz Truss won the Conservative Party leadership and became Britain's prime minister with a promise to cap energy tariffs and cut taxes.Workers are silhouetted as they walk past the Bank of England, in London, Britain, August 8, 2022. REUTERS/Toby MelvilleInflation would remain above 10% for a few months after October, before falling, the BoE said.
On Friday, new finance minister Kwasi Kwarteng will give more detail about the government's fiscal plans, which may amount to more than 150 billion pounds of stimulus.However, it noted that the energy price cap, while reducing inflation in the short term, would boost pressures further out.
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