23rd March 2023 – (London) The Bank of England (BoE) has declared a rise in its benchmark interest rate of 0.25 percentage points, bringing it to 4.25 percent, the highest since the autumn of 2008. The central bank’s Monetary Policy Committee (MPC) made the decision in a majority vote of 7-2 during its meeting on Wednesday. In a statement issued on Thursday, the BoE announced the increase in interest rates in its efforts to combat inflation.
This rate hike is the 11th consecutive increase since December 2021, as the BoE strives to address the inflation issue. In February, the inflation rate unexpectedly soared to 10.4 percent, significantly surpassing the bank’s 2 percent target, leading the bank to take steps to regulate the situation.
The BoE’s decision to raise the interest rates reflects its determination to curtail inflation. Despite the higher-than-anticipated inflation data, the bank maintains its prediction of a decrease in inflation in Q2 2023. This is due to the government’s backing of energy bills and the reduction of wholesale energy costs.
The BoE has also revised its GDP estimate for Britain, anticipating a slight increase in Q2 compared to the 0.4 percent decline predicted in its February Report. The bank’s statement indicates that the rate hike is unlikely to have a significant impact on economic growth.
The banking sector globally has experienced recent upheaval, but the BoE has determined that the British banking system is “resilient” and well-positioned to support the economy in various economic scenarios, including a period of high-interest rates. The bank’s assessment of the banking system’s resilience should instil confidence in investors and financial markets.