The Bank of England (BoE) announced on Thursday its Monetary Policy
Committee (MPC) voted by a majority of 8-1 to rise the Bank Rate from 1.25
percent to 1.75 percent at its August meeting.
Most economists had predicted a rise of 50 basis points in the BoE’s key
interest rate.
In its statement, the BoE notes:
- Inflation in UK and the rest of Europe has intensified significantly
since MPC’s previous meeting;
- UK’s CPI inflation is expected to increase more than projected in May,
from 9.4% in June to just over 13% in 2022 Q4, and to stay at very elevated
levels throughout much of 2023, before declining to the 2%-target two years
ahead;
- UK is now projected to enter recession from Q4;
- UK labour market remains tight;
- There is a risk that longer period of externally generated price
inflation will lead to more enduring domestic price and wage pressures;
- Risks around MPC’s projections from both external and domestic factors
are exceptionally large at present;
- MPC will take the actions necessary to return inflation to the 2%
target sustainably in medium term, in line with its remit;
- Policy is not on pre-set path.
- MPC will consider and decide appropriate level of Bank Rate at each
meeting;
- The scale, pace and timing of any further changes in Bank Rate will
reflect MPC’s assessment of economic outlook and inflationary pressures;
- MPC will be particularly alert to indications of more persistent
inflationary pressures, and will, if necessary, act forcefully in response