HomeLatest NewsBank of England hikes rates by 50 bps to 2.25%, avoids more...

Bank of England hikes rates by 50 bps to 2.25%, avoids more aggressive action

LONDON: Britain’s central bank raised its key interest rate by another half-percentage point on Thursday, avoiding more aggressive inflation control measures taken by the US Federal Reserve and other banks.

It is the seventh consecutive move by the Bank of England to raise borrowing costs as rising food and energy prices fuel a cost-of-living crisis considered the worst in a generation. Despite facing deflation, a tight labor market and the highest inflation in four decades, officials decided against acting more boldly because big growth threatened to tip the economy into recession.

The bank matched its half-point increase last month – the biggest in 27 years – to bring its benchmark rate to a 14-year high of 2.25%. The decision was delayed for a week as the United Kingdom mourned Queen Elizabeth II and new Prime Minister Liz Truss’ government announced a cap on fuel bill increases for households and businesses.

The energy relief package meant consumer prices would peak at 11% in October, lower than previously expected, the Bank’s Monetary Policy Committee said.

“Nonetheless, energy bills will still rise and inflation is expected to remain above 10% in the next few months, before starting to ease, coupled with the indirect effect of higher energy costs,” the bank said.

The UK decision comes during a busy week for central bank action that has been marked by much more aggressive moves to lower rising prices for consumers. The US Federal Reserve raised rates by three-quarters of a point for the third straight time on Wednesday and forecast a bigger increase.

Also on Thursday, the Swiss central bank implemented its biggest-ever increase in key interest rates.

Rising inflation is a cause of concern for the central bank

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Since then, the Truss government has unveiled a

The Bank of England avoided pressure to grow even as other banks around the world took aggressive steps against inflation as the global economy recovered from the Covid-19 pandemic and then the war in Ukraine.

This month, Sweden’s central bank raised its key interest rate by a full percentage point, while the European Central Bank made its biggest rate hike for the 19 countries that use the euro currency, with a three-quarter point increase.

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