The Bank of England (BOE) may to announce its biggest interest rate increase in more than 27 years on Thursday as it seeks to rein in inflation driven by the fallout from Russia’s invasion of Ukraine, Danika Kirka reported for the Associated Press (AP) late on August 4, 2022.
Photo Insert: The BOE raised the cost of borrowing by 50 basis points to 1.75%.
Reporting for CNN Business, Anna Cooban said the BOE raised the cost of borrowing by 50 basis points to 1.75% — the sixth time the central bank has raised rates since December, and follows recent hikes by the European Central Bank and Federal Reserve to tame runaway prices.
In June, annual consumer prices rises reached a four-decade high to hit 9.4%, plunging millions of Britons into a cost-of-living crisis that has forced many to choose between heating or eating. BOE said inflationary pressures had "intensified significantly" in recent weeks.
The BOE has been criticized for moving too slowly to combat inflation, which accelerated to a 40-year high of 9.4% in June and has driven a cost-of-living crisis. While the central bank has approved five consecutive rate increases since December, none has been more than a quarter-point.
The last time the UK approved a similar rate increase was December 1994, when interest rate decisions were still made by the treasury chief in consultation with the central bank governor.
In contrast, the US Federal Reserve increased its key rate by three-quarters of a point in each of the past two months to a range of 2.25% to 2.5%. Even the European Central Bank’s first increase in 11 years was a larger-than-expected half-point hike last month.
“After a number of central banks across the world have picked up the pace of their tightening cycle, the Bank of England is starting to look like something of a laggard when it comes to raising rates,” said Luke Bartholomew, senior economist at abrdn.
“We expect this impression to be somewhat corrected … with the bank hiking interest rates by half a percent.”