Wed. Sep 28th, 2022

London (EFE).- The Bank of England raised interest rates in the UK by 0.50 percentage points this Thursday, to 2.25%, the highest level since December 2008.

The Bank of England’s monetary policy committee accelerated rate hikes to tackle inflation, which stood at 9.9% in August, against its official target of 2%.

The United States yesterday hiked interest rates in that country by 75 basis points to a range of 3 to 3.25%, the highest level in 14 years, after the currency rose in the United Kingdom.

Bank of England facade
Bank of England, in a file photo. EFE/EPA/ANDY rain

For its part, the European Central Bank (ECB) raised them to 1.25% on September 8, the biggest increase in its 24-year history.

The Bank of England committee also voted unanimously to reduce the portfolio of government bonds it bought in its quantitative easing program introduced during the 2009 financial crisis.

Thus, it plans to reduce it by 80,000 pounds (91,500 million euros at today’s exchange rate) to 758,000 million pounds (870,000 million euros) in the next twelve months, it indicated in its statement.

UK Recession

The agency estimates that national gross domestic product (GDP) could contract by 0.1% between July and September, coupled with a 0.1% contraction between April and June, meaning the UK is already in recession.

One euro bill and one pound bill
A 20 euro note and a 20 pound note in London in a file photo EFE/Andy Rain

It has also revised its inflation forecast, which now tops out at 11% in October, compared to an earlier forecast of 13%, given that the government’s plans to contain fuel prices will help control the Consumer Price Index (CPI).

Regarding rates, five members of the Monetary Policy Committee voted for a rate hike of 0.5 percentage points, three favored a 0.75 point hike and one preferred a 0.25 hike, the entity explained.

The committee warned that at its November meeting it will present this Friday an analysis of the impact on its economic forecast and the potential impact of new “increase” rate plans by Prime Minister Liz Truss’ Conservative government.

The executive has signaled that it is preparing potentially deflationary measures that increase public debt, such as cutting corporate taxes and dropping caps on bankers’ bonuses, in addition to guaranteed loans to energy distributors to limit invoice growth.

The Bank of England is also watching developments in the pound sterling, which has depreciated sharply against the dollar on fears of British financial conditions.

Web version: Rosa Corona

By admin

Leave a Reply

Your email address will not be published.