LONDON (AP) — The Bank of England raised its key interest rate to the highest level in 13 years on Thursday as policymakers around the world battle inflation fueled by high energy prices and war. from Russia to Ukraine and ongoing concerns about COVID-19.
The central bank’s monetary policy committee voted 6-3 to raise interest rates for a fourth consecutive meeting, raising the rate the Bank of England pays other banks by a quarter of a percentage point, to 1%. Minority shareholders wanted to take it even higher, to 1.25%.
The decision comes a day after the US Federal Reserve stepped up its attack on inflation, approving the largest rate increase in more than two decades and signaling that more are on the way. The Fed raised its short-term policy rate by half a percentage point, to a range of 0.75% to 1%.
Other central banks in the world, from Sweden in Australiahave also begun to take similar measures.
Soaring consumer prices in the UK are fueling a cost of living crisis marked by soaring energy bills and soaring food and transport prices. The Bank of England is struggling to show it is serious about controlling inflation without acting so aggressively that it undermines consumer confidence.
“The Bank of England has a tough job ahead of it – inflationary pressures from external factors are getting stronger,” Dmitri Theodosiu, head of foreign exchange and interest rates at Investec, said in a note to the media. investors. “And with the cries of ‘higher, higher’ ringing in the ears comes the realization that too much intervention could lead to an economic downturn.”
Britain’s inflation rate hits its highest level in 30 years 7% in March, more than triple the central bank’s 2% target. Economists expect inflation to reach 9% or more later this year.