The Bank of England has announced this Thursday a new rise of 0.5 percentage points in interest rates, which go from 3.5% to 4%, its highest level since 2008, as part of its plan to counteract inflation in the United Kingdom.
As the analysts had foreseen, the monetary policy committee of that institution voted in favor of applying this new increase, the tenth consecutive one that the entity decides. The announcement is made in a context of high inflation, after December closed at 10.5%, two tenths less than in November.
The country’s interest rates are now at their highest level since October 2008, when the English central bank began cutting rates in response to the financial crisis. At their meeting, seven members of the institution’s monetary policy committee (MPC) advocated increasing rates against two who were in favor of keeping them unchanged.
“Looking ahead, the MPC will adjust rates as necessary in order to bring inflation back to the 2% target in a sustainable manner in the medium term,” committee members said in a report released today. The Bank of England has predicted a recession for five consecutive quarters, beginning in the first three months of 2023.
According to its forecasts, which soften the projections previously offered by the agency, the national Gross Domestic Product (GDP) will fall by 0.25% this year and by 0.25% in 2024, before rising to almost 1% by 2025. .
The committee indicated that the outlook for the labor market has also improved and believes that the unemployment rate will rise to 5.25%, below the 6.5% previously estimated. The Bank also considers that the British economy will not reach its pre-pandemic size again until 2026. After learning these data, the British Economy Minister, Jeremy Hunt, indicated that the Government supports “the actions taken today by the Bank of England to get inflation down this year.” “We will play our part by making sure the government’s decisions are in line with the bank’s approach, resisting the impulse right now to finance additional spending or cut taxes through borrowing, which that would only add fuel to the inflation fire and prolong the pain for everyone,” he said.
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