The Bank of England raised its key base rate by one-quarter of a percentage point to 4.25% at the Monetary Policy Committee’s March meeting, marking the eleventh consecutive increase in UK rates.
- UK inflation jumped to 10.4% in February
- The BoE expects economic growth to pick up
- The BoE bank said the UK’s banking system “remained resilient”
The Bank of England (BoE) raised its key base rate by one-quarter of a percentage point to 4.25% at the Monetary Policy Committee’s (MPC’s) March meeting, marking the eleventh consecutive increase in UK rates.
MPC members voted by seven to two in favour of the quarter-point rise. Although two members called for no change, the majority judged that an increase was warranted, given a recent intensification in inflationary pressures. Having fallen to 10.1% in January, the UK’s annualised rate of consumer price inflation unexpectedly jumped in February to 10.4% – far above the BoE’s target inflation rate of 2%. Nevertheless, the BoE expects inflationary pressures to ease over the rest of the year to 4%, although this remains somewhat higher than the Office for Budget Responsibility’s forecast of 2.9%. The British Chambers of Commerce welcomed the BoE’s bid to cool inflation, but warned that rates alone are “a blunt instrument” that will not address all the factors fuelling inflation.
“The BoE expects inflationary pressures to ease over the rest of the year to 4%”
The economic outlook appears a little brighter; the BoE expects growth to pick up slightly in the second quarter of 2023, helped by recent declines in wholesale energy prices and a robust labour market. Meanwhile, the central bank insisted that the UK’s banking system “remained resilient” following the collapse of Silicon Valley Bank (SVB) and Signature Bank in the US, and the failure of Credit Suisse, but acknowledged the “large and volatile moves in global financial markets” caused by their collapse.
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