BoE set for fifth rate hike in row as inflation soars

Publish date: Thu, 16 Jun 2022, 11:33 AM
LONDON: The Bank of England is expected on Thursday to raise its key interest rate for a fifth straight time to cool runaway inflation that is causing a cost-of-living crisis in Britain.
Economists widely forecast that the BoE will use a regular meeting to hike borrowing costs by a quarter-point to 1.25 percent, or the highest level since the global financial crisis in 2009.
Some experts predict an even higher increase, mirroring aggressive rate-tightening by the Federal Reserve.
The US central bank on Wednesday announced the most aggressive interest rate increase in nearly 30 years, raising the benchmark borrowing rate by 0.75 percentage points.
The Bank of England's Monetary Policy Committee will announce its decision at 1100 GMT.
The BoE "is expected to produce another 25 basis-point hike, although there is a growing number expecting the MPC to join the super-sized club before inflation hits double figures", noted Craig Erlam, senior market analyst at Oanda trading group.
UK inflation stands at nine percent, the highest level in 40 years, and is forecast to keep rising.
Prices are soaring worldwide as economies reopen from pandemic lockdowns and in the wake of the Ukraine war that is pushing already high energy costs even higher.
British economic output declined for a second month in a row in April, weighed down by rocketing prices that are causing a cost-of-living crisis for millions of Britons, while increasing the risk of a UK recession this year.
"The MPC's decision is not an easy one," City Index analyst Fawad Razaqzada said ahead of Thursday's rate announcement.
"It must balance the risk of keeping inflation persistently high by not being too aggressive against an uncertain growth backdrop."
Data this week also revealed the first rise in UK unemployment since the end of 2020 – although at 3.8 percent it remains at a near 50-year low point amid record-high job vacancies.
At the same time, the value of average UK wages is falling at the fastest pace in more than a decade.
Fearing fallout from surging inflation, the BoE began to raise its key interest rate in December, from a record-low level of 0.1 percent.
Almost two years earlier, as the Covid-19 pandemic began to take hold, the BoE slashed the rate to just above zero and decided to pump massive sums of new cash into the economy.
In the neighbouring eurozone, the European Central Bank is next month set to raise interest rates for the first time in more than a decade.
 - AFP
Be the first to like this. Showing 0 of 0 comments

Post a Comment