The Bank of England, acting as the central bank of Great Britain, after a meeting of the Monetary Policy Committee, decided to increase the base interest rate (an analogue in Russia, the key rate) from 0.75% to 1 %. Thus, the Bank of England rate reached its maximum since the beginning of 2009.
All committee members voted for the rate increase, however, out of nine people, three voted for an even more significant increase: immediately to 1.25%. The tightening of monetary policy in the Central Bank stick in relation to the jump in inflation in the United Kingdom. In March alone, the prices of goods and services increased by 7%, which was a monthly record since March 1992. By the end of this year, inflation will be double what was previously expected: 10.25% against 5, 75%, respectively.
Among the reasons for what is happening in the UK economy, the Bank of England points to the geopolitical situation around Ukraine, disruptions in international supply chains and an increase in the incidence of a new coronavirus infection in China. .
For the time being, the tight monetary policy of the Bank of England is aimed at getting inflation back to the target value (target) of 2%. The Committee believes that world commodity prices will no longer skyrocket, logistics bottlenecks will be resolved over time, and slowing demand growth and oversupply in markets will gradually balance out, reducing the price growth rate in the UK. the Central Bank said in a statement.
On December 16 last year, the Bank of England unexpectedly raised the rate from 0.1% to 0.25% for the first time in many years, despite the market not expecting this. On February 3, the rate rose again, to 0.5%, but economists had already predicted this step. At that time, for the first time since 2004, the base rate was doubled consecutively. Even then, the Central Bank Committee pointed to the role of rising inflation and also downgraded the country’s GDP growth forecasts.
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