The Bank of England (BoE) implemented its ninth consecutive interest rate increase at the Monetary Policy Committee’s (MPC’s) December meeting. Six policymakers voted in favour of a 50 basis point rise, taking the key base rate to 3.5%.
- Base rate was raised to 3.5%
- Inflationary pressures eased slightly in November
- The UK is believed to be in recession
The Bank of England (BoE) implemented its ninth consecutive interest rate increase at the Monetary Policy Committee’s (MPC’s) December meeting . Six policymakers voted in favour of a 50 basis point rise, taking the key base rate to 3%. One member voted for a repeat of November’s larger increase of 75 basis points, and two called for rates to remain unchanged at 3%.
“The MPC warned of “considerable uncertainties around the outlook”
The central bank continues to address the persistent problem of inflation. The UK’s rate of inflation – as measured by the consumer price index – eased from 11.1% year on year in October to 10.7% in November, raising hopes that it might have peaked. Nevertheless, inflation remains stubbornly high and well above the BoE’s rolling 2% target .
The UK economy is widely believed to be in recession; although it posted growth of 0.5% in the month of October, activity is expected to falter as households and businesses grapple with ongoing price pressures.
In the minutes from the meeting, the MPC warned of “considerable uncertainties around the outlook”, maintaining that it would “respond forcefully” if inflationary pressures appear more persistent. Meanwhile, in response to the rate increase, the British Chambers of Commerce called on the BoE to ensure that “further interest rate action does not exacerbate the recession the UK is entering”. Elsewhere, the Institute of Directors urged the central bank not to tighten too far in order to avoid “prolonging the pain”.
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