LONDON: The Bank of England signalled the tide was turning in its battle against high inflation after it raised interest rates on Thursday for the 10th meeting in a row, prompting investors to prepare for the end of its run of higher borrowing costs.
The BoE’s interest rate setters voted 7-2 to push Bank Rate to 4.0% - its highest since 2008 - from 3.5%. The move had been expected by most investors and economists polled by Reuters. Like other central banks such as the US Federal Reserve and the European Central Bank, which raised rates on Wednesday and Thursday respectively, the BoE is trying to smother the risks from an inflation rate that is way above its target.
But it is also worried about aggravating what is expected to be the worst recession among big rich economies this year.
It said its rate hikes going back to December 2021 were likely to become an increasing drag on the economy, helping to bring inflation down to about 4% by the end of this year. Previously the BoE had forecast 2023 inflation at around 5%.
“We’ve seen the first signs that inflation has turned the corner,” Governor Andrew Bailey told reporters after the rate hike. “But it’s too soon to declare victory just yet, inflationary pressures are still there.”
The Monetary Policy Committee (MPC) would need to be “absolutely sure” that inflation was receding, he said.
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