The British central bank is bracing itself against escalating inflation with its largest rate hike in decades. The Bank of England (BoE) on Thursday raised its key monetary policy rate by 0.75 percentage point to 3.0 percent. It was the strongest increase since 1989. The European Central Bank (ECB) and the US Federal Reserve have recently taken advantage of this extraordinary rate hike on several occasions to counter upward pressure on prices.
The currency watchdogs in London responded to the high inflation on the island, which recently stood at 10.1 percent, with the sharp increase. They indicated that further rate hikes would be necessary.
A high interest rate jump was expected
In August and also in September, the BoE raised interest rates by 0.50 percentage point. The interest rate hike of 0.75 percentage point was now strongly expected in the financial markets. At times, a full percentage point increase was expected in the course of the financial market turbulence caused by former Prime Minister Liz Truss’ economic plans.
Truss had expressed doubts about the viability of its financial plans, leading to serious turmoil in the financial markets. This forced the BoE to intervene in the bond market. After massive criticism, Truss resigned after just six weeks in office.
New prime minister tries to change course
Her successor, Rishi Sunak, is now changing course, signaling the need to cut government spending and possibly raise taxes. Details should be in a financial report to be published Nov. 17. After the turbulence in the financial markets subsided, the central bank was able to sell bonds from its own holdings on Tuesday as part of its monetary tightening.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
