Bank of England raises interest rates by 0.25 per cent, resists bolder move

The Bank of England has raised interest rates by a quarter-percentage-point, shrugging off pressure for a bolder move to combat price increases that have pushed inflation to a 40-year high, according to AP.

While the United Kingdom’s central bank began raising interest rates earlier than its counterparts, the Bank of England is now trailing the U.S. Federal Reserve in the worldwide fight against inflation fueled by soaring food and energy prices.

The Bank of England’s action Thursday took its key rate to 1.25 per cent and marked five consecutive increases that began in December.

Earlier the Bank of England was under pressure to raise interest rates more aggressively.

“It is quickly becoming apparent that more radical action is needed for the Bank of England to establish some sense of stability, because tinkering around the edges simply isn’t cutting it,” Michael Hewson, chief market analyst at CMC Markets UK, said in a note to clients.

The war in Ukraine has boosted food and energy prices as the fighting disrupts shipments of oil, natural gas, grain and cooking oil. That is adding to price increases that began last year as the global economy started to recover from the Covid-19 pandemic.

Bank of England policymakers have been cautious about raising interest rates too quickly, arguing that many of the inflationary pressures facing the British economy are external and beyond the bank’s control.

• US Federal Reserve hikes rate by 0.75 per cent