Bank of England delivers 11th rate hikeArchive
LONDON: The Bank of England (BoE) raised interest rates for the 11th time in a row on Thursday, but said a surprise resurgence in inflation would probably fade fast, prompting speculation it had ended its run of hikes.
Sounding more upbeat about the outlook for Britain’s sluggish economy but noting the risks posed by turmoil among global banks, the BoE’s nine rate-setters voted 7-2 in favour of a 25 basis-point increase in bank rate to 4.25 per cent, as expected by economists polled by Reuters.
This rate rise extends a run of increases that began in December 2021, although it was the Monetary Policy Committee’s (MPC) smallest increase since June.
Investors priced in one more quarter-point rate hike, probably at the BoE’s next meeting on May 11, pushing up sterling moderately against the dollar. But many economists said the central bank might have already reached the end of its tightening cycle.
BoE Governor Andrew Bailey was non-committal when asked about the latest rate rise. “We don’t know whether it’s going to be the peak,” he told broadcasters.
“What I can tell you is that we’ve seen signs of inflation really peaking now. But of course it’s far too high…. We need to see it starting to come down progressively and get back to target.” The BoE - which is trying to reconcile the weak economic outlook and anxieties about global banks with stubborn inflation - repeated a message it gave last month that suggested raising rates was less urgent.
“The MPC will continue to monitor closely indications of persistent inflationary pressures, including the tightness of labour market conditions and the behaviour of wage growth and services inflation,” the BoE said. “If there were to be evidence of more persistent pressures, then further tightening of monetary policy would be required.”
Published in Dawn, March 24th, 2023