The Bank of England raised interest rates for a 14th consecutive time on Thursday as it kept up its efforts to banish persistently high inflation from the British economy.
Policymakers lifted rates by a quarter of a percentage point, to 5.25 percent, the highest since early 2008. That was a slower pace of tightening, compared with the previous meeting’s half-point increase, as data recently showed that had inflation eased to its slowest pace in more than a year.
“Inflation is falling and that’s good news,” Andrew Bailey, the governor of the bank, said in a statement on Thursday. But he added that “we need to make absolutely sure that it falls all the way back to the 2 percent target.”
Consumer prices rose 7.9 percent in June from a year before, slackening more than economists had expected. And core inflation, which excludes energy and food prices, providing a closer gauge of domestic price pressures, fell to 6.9 percent from 7.1 percent.
After months of inflation readings coming in higher than the central bank’s forecasts, intensifying concerns about the stubbornness of high prices in Britain, June’s inflation data provided some much needed relief for the central bank, which has been under fire for failing to contain inflation more quickly.
Alongside its policy decision, the central bank published new inflation and economic forecasts. And in those, there was more good news, including for the government: Inflation would fall to just below 5 percent by the end of the year, the bank predicted, which would allow Prime Minister Rishi Sunak to achieve his pledge of halving inflation this year.
But otherwise, the forecasts presented a gloomy outlook of weak economic growth and risks that domestic inflationary pressures were becoming more embedded in the economy. Policymakers said they would make sure interest rates were “sufficiently restrictive for sufficiently long” to push inflation down to their target level.
Source link https://www.nytimes.com/2023/08/03/business/bank-of-england-interest-rates.html