Conforms to 5.25% after the new interest rate increase of 25 basis points
Inflation in Britain jumped in 2022 to the highest levels of the last 41 years and specifically to 11.1%.
Yesterday, the Bank of England (BoE) raised its interest rates to the highest levels in the last 15 years, following the same course as the European Central Bank and the Federal Reserve Bank of the United States. Interest rates are now up 25 basis points to 5.25%, while the bank warned that borrowing costs are likely to remain at high levels for some time. In contrast to the US Federal Reserve or the ECB, both of which made the same moves last week, the relevant ECB Monetary Policy Committee did not hint at the end of the cycle in the fight against inflation. On the outlook for interest rates, she emphasized that she wants to ensure that interest rates remain sufficiently restrictive for as long as necessary to bring inflation back to her 2% target. He also underlined that some of the risks from the most permanent inflationary pressures have begun to crystallize.
It is worth mentioning that last year Britain's inflation jumped to the highest levels in the last 41 years and specifically to 11.1% , but gradually and has since de-escalated more slowly than other countries. In June in particular, it fell to 7.9%, a level that was the highest among all major economies.
In the past week, analysts and economists polled by the Reuters news agency had predicted that interest rates would reach 5.75% in the coming months, while the Bank of England itself, based on recent market assumptions, estimates that these will exceed 6%, where they will peak. Within the next three years, on average, they will be 5.5%. “Inflation is causing problems for those who are struggling most financially, and we must do everything we can to ensure that it falls back to the 2% target,” said the bank's governor, Andrew Bailey. At yesterday's meeting, the vote was 6-3 in favor of the increase, and for the first time there were objections to the decision.
Two members of the Monetary Policy Committee, Kathryn Mann and Jonathan Haskell, favored a 50 basis point increase. base in August. Swati Dhingra, on the other hand, wanted the cost of borrowing to remain unchanged and from the beginning of the year warned against excessive tightening. However, in relation to the course of inflation, the Bank of England predicts a fall in the index to 4.9% by the end of the year, which means that the decline will be faster than it had estimated in May. However, the Bank of England added that the index will weaken slightly after the end of 2024 and will not return to the 2% target until the second quarter of 2025, three months later than it had indicated in May.