(Finance) – As expected, the Monetary Policy Committee (MPC) of the Bank of England has raised interest rates by 50 basis points, bringing the cost of money to 1.75%. In the meeting ended August 3, 2022, the MPC voted with an 8-1 majority to raise the bank rate by 0.5 percentage points, while one member would have preferred to raise the bank rate by 0.25 percentage points, to 1.5%. The one approved today is the largest single rate hike since 1995implemented in an attempt to curb runaway inflation.
“L’inflation it is expected to increase more than expected in the May report, from 9.4% in June to just over 13% in the fourth quarter 2022, and remain at very high levels for much of 2023, before falling to the 2% target two years to come, “reads the Bank of England statement.
The institution led by Andrew Bailey expects the UK will enter a recession starting in the fourth quarter of this year. Real after-tax household income is expected to decline sharply in 2022 and 2023, while consumption growth turns negative.
“The MPC will take the necessary actions to bring inflation back to the 2% target in a sustainable way in the medium term, in line with its mandate – it is explained – The policy is not on a predetermined path. The Committee, as always , will evaluate and will decide the appropriate level of the bank rate at each meeting. The size, pace and timing of any further changes in the bank rate will reflect the Committee’s assessment of the economic outlook and inflationary pressures. The Committee will pay particular attention to indications of more persistent inflationary pressures and, if necessary, it will act vigorously in response“.