Bank of England raises UK interest rates to highest level since 2008
By Pan Pylas, The Associated Press on May 11, 2023.
LONDON (AP) – The Bank of England has raised interest rates to their highest level since late 2008 as it continues to combat stubbornly high inflation in the U.K. The decision on Thursday by the bank’s nine-member Monetary Policy Committee to lift its main interest rate by a quarter of a percentage point to 4.5% was widely anticipated in financial markets. The increase was its 12th in a row. Like other central banks around the world, the Bank of England has sought to keep a lid on inflation, which over the past year has been fueled by Russia’s invasion of Ukraine. That sent energy prices soaring, a development that then led to price increases across a wide array of goods and services. THIS IS A BREAKING NEWS UPDATE. AP’s earlier story follows below. LONDON (AP) – The Bank of England is set to raise interest rates later Thursday to their highest level since late 2008 as it continues to combat stubbornly high inflation in the U.K. Financial markets expect the bank’s nine-member Monetary Policy Committee to lift its main interest rate by a quarter of a percentage point to 4.5%, its 12th straight increase. Other major central banks, such as the U.S. Federal Reserve and the European Central Bank, have also been raising interest rates at a consistent pace in order to get inflation rates down from multi-decade highs. The Bank of England started raising interest rates in late 2021 from a low of 0.1% in order to keep a lid on price rises that were first largely stoked by bottlenecks resulting from the lifting of coronavirus lockdown restrictions and subsequently by Russia’s invasion of Ukraine, which led to energy prices surging. Alongside its interest rate decision, the bank will be publishing its quarterly economic projections for the stagnating U.K. economy. With inflation currently running at a higher-than-expected annual rate of 10.1%, economists will be interested to see how quickly the bank expects inflation to get back toward its target of 2%. If it thinks inflation will fall rapidly over the coming months, the pressure on it to raise interest rates further will likely diminish. “While a hike this week looks – almost – like a done deal, the outlook for further hikes thereafter remains uncertain,” said Kallum Pickering, senior economist at Berenberg Bank. Those looking to get on the housing ladder or to take out loans will be hoping that Thursday’s anticipated increase will be the last in the current cycle. 12-11
