BoE policymakers implemented their largest single increase in UK interest rates since February 1995 at their August meeting. The members of the nine-strong MPC voted by eight to one in favour of a rise of 0.5 percentage point, taking the UK’s key base rate to 1.75% – its highest level since 2008.
- UK base rate rose to 1.75%
- CPI rose to 9.4% YoY in June
- The UK is expected to slip into recession in Q4 2022
Bank of England (BoE) policymakers implemented their largest single increase in UK interest rates since February 1995 at their August meeting . The members of the nine-strong Monetary Policy Committee (MPC) voted by eight to one in favour of a rise of 0.5 percentage point, taking the UK’s key base rate to 1.75% – its highest level since 2008 . The move represented the MPC’s sixth consecutive rate increase as the MPC seeks to curb inflation. The MPC also indicated that it aims to begin selling the Government bonds held in its Asset Purchase Facility after its September meeting.
“The BoE predicted that the UK will fall into recession towards the end of 2022”
Higher prices for food and fuel drove up the UK’s rate of consumer price inflation from 9.1% in May to 9.4% year on year in June, representing its highest annualised increase since 1982. Looking ahead, the BoE predicts that UK inflation will peak above 13% by the end of the year. Surging energy prices are also expected to continue to drag on economic growth: the BoE predicted that the UK will fall into recession towards the end of 2022.
In the BoE Governor’s annual Mansion House speech, Andrew Bailey pledged to bring inflation back to target, stating “Let me be quite clear: there are no ifs or buts in our commitment to the 2% inflation target. That’s our job, and that’s what we will do”.
