1667482101 The Bank of England approves the biggest rate hike in

The Bank of England approves the biggest rate hike in 30 years

The Bank of England approves the biggest rate hike in

The Bank of England (BoE) raised interest rates by 0.75% to 3% this Thursday. This is the largest hike agreed by the British Monetary Institute in more than 30 years (since 1989), but it is in line with market and financial analyst forecasts. In their most recent monetary policy decisions, the European Central Bank (ECB) and the US Federal Reserve (Fed) also raised their key interest rates by 0.75 basis points. Of course there are differences in level: while in Europe the official cash price is 2%, in the USA it already ranges between 3.75% and 4%.

Much more relevant than the rise are the words that accompanied the decision in this Thursday’s statement by the BoE’s Monetary Policy Committee: “Most members of the committee estimate that if the economy in general develops according to our forecasts, new interest rate hikes could be needed to achieve a sustained return to inflation targeting, but even to peaks lower than those marked in financial market prices,” the text reads.

Inflation in the UK is at 10.1% and the BoE asserted in its statement that price pressures will continue for a while. However, the arrival of new Prime Minister Rishi Sunak at Downing Street and the reversal of the historic tax cut announced by his predecessor Liz Truss have brought some calm and stability to markets. While analysts’ forecasts initially pointed to rates near 6% for 2023, today’s consensus among experts suggests that increases will continue until they approach 5%.

Despite this, the BoE reminds that the economic environment is “very challenging” where inflation will peak in the last 40 years, around 11%. At the same time, he believes the UK economy has already entered a recession that could last two years, longer than the 2008 crisis hit the UK.

Expected by most analysts, the decision was not unanimous. Two members of the BoE’s monetary policy committee have backed hikes lower than those finally approved, arguing that the economy was already in recession. However, the majority of the committee, made up of nine experts, preferred to send a more forceful message in the fight against inflation, recalling that interest rates may have to rise to 5.2%, in line with the panel’s forecasts Effect.