Bank of England raises interest rates to 0.5%
Rise aims to combat soaring inflation despite
faltering economic recovery from pandemic and deepening cost of living crisis
Richard
Partington Economics correspondent
@RJPartington
Thu 3 Feb
2022 12.01 GMT
https://www.theguardian.com/business/2022/feb/03/bank-of-england-raises-interest-rates-to-05
The Bank of
England has raised interest rates to 0.5% to tackle soaring inflation amid
intense pressure on households in Britain’s cost of living crisis.
Threadneedle
Street’s nine-member monetary policy committee voted by a narrow majority of
five to increase its base rate from 0.25%, judging that an immediate rise was
necessary despite fears over the impact on the economy from Covid-19. Four
members voted for an immediate increase to 0.75%.
The pound
rose on the international currency markets by 0.3% against the US dollar.
The move,
which was widely anticipated by financial markets, comes after the official
measure of annual inflation hit a 30-year high of 5.4% in December, an increase
fuelled by a surge in household energy bills and supply chain logjams pushing
up the cost of the weekly shop.
Against a
backdrop of surging household energy prices, the Bank warned inflation was on
course to peak close to 7.25% in April, a sharp adjustment to its previous
forecast of 6%.
The
interest rate rise followed the chancellor Rishi Sunak’s announcement of plans
to give all households a £200 discount on their energy bills in response to
Ofgem, the energy regulator, increasing the dual-fuels price cap by £693 from
April to £1,971 a year. Low-income households will also receive further support
under Sunak’s plans .
The MPC
said uncertainty over the economic impact of the Omicron variant had declined,
and its consequences for jobs and growth were likely to be more limited than
feared in December. Despite concerns over the renewed wave in the pandemic, the
Bank raised interest rates from the record low of 0.1% to 0.25% in December.
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