Bank of England Raises Rates a Half-Point, Its Biggest Increase in 27 Years

Enter a keyword
The Bank of England raised interest rates by half a percentage point on Thursday, the largest jump since 1995, as policymakers strengthened their efforts to tackle inflation even as they warned Britain was heading into a long recession later this year, the New York Times reported. The bank raised rates to 1.75 percent, the highest since 2008, from 1.25 percent as it forecast the annual rate of inflation would climb above 13 percent when household energy bills jump higher in October. That would be the highest level of inflation in 42 years. Much of the surge in prices is still coming from the global energy market, the bank said. In the past three months, wholesale natural gas prices for this winter have nearly doubled, which is expected to lead to the price cap on household energy bills reaching 3,500 pounds (about $4,260) in the fall, three times higher than bills were a year ago, the bank predicted. The outlook for millions of British households is grim. Incomes, once adjusted for inflation and taxes, are predicted to fall sharply this year and next, in the worst decline in records dating to the 1960s. Britain will enter a recession in the last quarter of this year that will last through to the end of 2023, the bank forecast. “The latest rise in gas prices has led to another significant deterioration in the outlook for activity” in Britain and the rest of Europe, policymakers said, according to minutes of this week’s meeting. Britain “is now projected to enter recession.” The rate change announced on Thursday was the sixth increase since December as the bank tries to tackle inflation, which is running at its fastest pace in four decades. It has been under some pressure to increase rates by more than its usual quarter-point move as inflationary pressures persist and other major central banks also take more aggressive action to halt price increases. Read more.