The Bank of England’s Monetary Policy Committee (BoE) has voted to raise interest rates from 1% to 1.25%, marking its fifth straight increase as it seeks to offset the effects of rising inflation.
The Monetary Policy Committee voted by a 6-3 majority to raise interest rates to 1.25%, with a minority bidding to raise interest rates further to 1.5%.
The increase comes as the BoE raises its inflation forecast for the year, with CPI inflation expected to rise above 9% over the next few months and rise to just over 11% in October. The increase in October reflects higher projected energy prices for households following a further large increase in Ofgem’s price cap.
Along with external pressures such as the war in Ukraine and the impact of The Covid-19 pandemic, MPC also noted internal factors, including “the narrow labor market and pricing strategies of companies.”
The BoE’s monetary policy summary also notes that the UK’s GDP was “weaker than expected” in April, with bank officials now predicting that GDP will fall by 0.3% overall in the second quarter, which is weaker than originally expected in May. report.
The BoE said that the UK-weighted global growth in the second quarter of 2022 was broadly in line with expectations and that global inflationary pressures remained high and oil prices rose further. However, stock markets ended the period lower, while short-term and long-term government bond yields continued to rise.
In addition, the unemployment rate was 3.8% in the three months to April, and employment rose by 0.5%. The inactivity rate has declined slightly in recent months, but is still higher than before the pandemic, according to the BoE.
BoE said: “In view of the continuing signs of strong pressure on costs and prices, including the current tightness of the labor market, and the risk that this pressure will become more constant, the committee voted to increase bank interest rates by 0.25% to 1, 25%, at this meeting.
“The MPC will take the necessary steps to return inflation to the 2% target in the medium term, in line with its mandate. The scale, pace and timing of any further increase in interest rates will reflect the committee’s assessment of the economic outlook and inflationary pressures.