The Bank of England has raised interest rates sharply since 2009 at 1% on Thursday to address the current 10% inflation rate, as it has issued a warning that Britain is at risk of recession. Nine BoE planners voted 6-3 on a quarter-point increase from 0.75%. But Catherine Mann, Jonathan Haskel and Michael Saunders have called for a dramatic increase in 1.25% to eliminate the risk of inflation to enter the economy.
Economists had predicted that there would be a worse 8-1 vote to raise prices by 1%, another policy maker opposed the rise.The world’s largest banks are struggling to cope with inflation, which they once described as a period of turmoil during the reopening of the global economy, before Russia invaded Ukraine to raise electricity prices.
The BoE also said it was concerned about the impact of China’s COVID-19 closure policies that threaten to replicate inflationary pressures.On Wednesday, the US Federal Reserve raised prices by half to 0.75-1.0%, the largest increase since 2000, with Fed chairman Jay Powell saying another 50-point increase was on the table in the next two meetings. .
The BoE move represents a fourth consecutive rate hike since December – a sharp increase in borrowing costs over 25 years – and has made their message difficult about further increases, despite concerns about the sharp economic downturn.
The BoE said most policymakers believe that “some degree of further tightening monetary policy may be appropriate in the coming months”. Lower the word “modest” to describe future inflation.The split came from the Finance Policy Committee where two members said the direction was too tight, given the risk of growth.
Inflation against British consumer prices reached a 30-year high of 7% in March, more than three times the BoE target of 2%, and the central bank has revised its inflation forecast to show that it has risen more than 10% in the last three monthsof this year.Earlier it said it expected inflation to increase by about 8% in April.
The BoE said inflation in Britain would rise later than in other major developed economies due to Britain’s inflation rate, which rose sharply by 54 percent in April, which the BoE estimates will increase by another 40% in October.Post-tax family income average living standards is projected to decline by 1.75% this year, the biggest decline in the calendar year since 2011 and the second largest since BoE records began in the 1960s.
The BoE kept its economic growth forecast for this year at 3.75%, but lowered its 2023 forecast to show a 0.25% reduction from the previous growth rate of 1.25%. Reduce its growth by 2024 to 0.25% from 1.0%.
Although growth in the first quarter of this year is stronger than predicted by the BoE, it expects the economy to stagnate in the second quarter, due to additional public holidays and declining COVID checks, and a nearly 1% decline in GDP eventually. quarter after the next rise in energy prices began.
Those predictions were based on financial market betting that the BoE would raise interest rates by about 2.5% by next year and the central bank had signed off that it could be much higher.It said it expected inflation to fall by 1.3% over the next three years, the lowest rate compared to its target of 2% since the 2008-09 global financial crisis, after rising unemployment and the cost of living has hit the economy.
The BoE also said it would work on a plan to start selling government bonds that we have purchased since the global financial crisis a decade ago, currently worth less than $ 850 billion.BoE staff will review the MPC’s plan at its August meeting “which will allow the Committee to make a decision at the next meeting on whether it will start selling”.
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