The Bank of England raised this Thursday the reference interest rate by 0.75 points to 3%, the highest rise since 1989 and the highest level since 2008, to curb the rate of inflation, as announced on Thursday.
The Monetary Policy Committee of the British issuing bank voted by a majority (7 to 2) in favor of this rise in the price of money, as a way of controlling year-on-year inflation in the United Kingdom, which stands at 10.1%. , compared to the official target of 2%.
In a statement, the entity indicated that the United Kingdom could be on the way to entering a recession, although it said that it expects inflation to fall significantly from mid-2023.
The Bank of England’s (BoE) inflation rate target is 2% and with it currently above 10%, “further increases will be needed to reach the target,” the BoE said.
The UK central bank has warned that further interest rate hikes, possibly to 5.2%, may be needed to bring inflation down to 2%.
One committee member voted for a 0.50 percentage point increase, while another opted for a much smaller 0.25 percentage point increase.
According to BoE calculations, inflation could reach 11% by the end of this year, while the UK unemployment rate could reach 6.4% by the end of 2025, compared to 3.5% today.
Following the announcement, UK Finance Minister Jeremy Hunt said in a statement that “the most important thing the UK government can do is restore stability, repair public finances and reduce debt so that interest rate rises are Keep it as low as possible.”
“That is why the priority of this government is to control inflation and today the BoE took measures” to return to its inflation target (2%), “he added.
The minister pointed out that interest rates are rising globally due to an increase in prices as a result of the impact of the covid-19 pandemic and Russia’s invasion of Ukraine.
The accumulated debt of the United Kingdom was 2,450 million pounds sterling (about 2,800 million euros) at the end of September, equivalent to 98% of gross domestic product (GDP).
The new British prime minister, Rishi Sunak, took office last week with the aim of overcoming the economic crisis in the United Kingdom, mainly due to the increase in energy prices around the world.
Hunt is expected to present the government’s plan to clean up public finances to parliament on November 17 and is expected to announce new measures, possibly a tax increase and public spending cuts.
Source: TSF
