Bank of England Raises Rates Another Half a Point at an Uncertain Time

As Britain goes through a period of vast change, with a new government and new monarch, the central bank is steadily increasing interest rates to try to keep high inflation from becoming embedded in the nation’s economy, the New York Times reported. The Bank of England raised its key rate by another half a percentage point on Thursday, to 2.25 percent, taking it to the highest level since late 2008, but disappointing some who thought it would have made a three-quarter-point move. In Britain, consumer prices rose 9.9 percent in August from a year earlier, slowing slightly from the previous month but still near the fastest pace of inflation in four decades, as energy and food prices climbed higher. The British economy’s state of flux was evident in a rare three-way split among the Bank of England’s nine-person rate-setting committee, with members voting for both smaller and larger increases in the policy rate. The changes coming to Britain include the government’s freezing energy bills and planning to cut taxes to lessen the pain of the higher cost of living. At the same time, the pound has fallen to its weakest level against the dollar since 1985 as investors question the country’s economic outlook and fiscal policy, and despite a tight labor market, a recession seems inevitable. The Bank of England forecast that the economy would contract slightly in the third quarter, following a drop in the second quarter, which is widely considered to indicate a recession. Read more.