UK raises basic interest rate

 UK raises basic interest rate

On February 3, the Bank of England (BoE) decided to raise interest rates to 0.5%.

This is the voting result of 9 members of the Monetary Policy Committee (MPC). Even up to 4 members voted to raise interest rates to 0.75% - the highest level since the BoE became operationally independent 25 years ago.

Previously, on December 16, with a vote of 8-1, the BoE surprised the markets when it decided to raise the basic interest rate from 0.1% to 0.25%. Thus, this is the first time since 2004, the BoE has raised interest rates consecutively within more than a month.

The pound sterling quickly jumped to $1.36, its highest since January 20 and hitting a two-year high against the euro. UK government bonds sold off, with the highest 10-year yield since January 2019.

The Bank of England on Thursday also raised its inflation forecast to an April peak of 7.25%, from 6% forecast in December. In its report, the MPC said any tightening decision Which monetary policy tightening next will depend on the medium-term inflation outlook. If the economy develops in line with their forecast this month, the measures will be more modest.

With inflation rising and more persistent than policymakers expected, the BoE is the first major central bank to embark on a test, said Anna Stupnytska, Global Macro Economist at Fidelity International. fighting inflation amid slowing growth and volatile energy markets, creating a cost-of-living crisis despite rising real incomes.