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BANK RATES RAISED AGAIN!!
Last month, the Bank of England (BoE)
sanctioned a further increase in its
benchmark interest rate as inflation
continues to surge significantly ahead
of the Bank’s target level.
Following a meeting held in mid-
March, the BoE’s nine-member Monetary
Policy Committee (MPC) voted by
an 8-1 majority to raise Bank Rate from
0.5% to 0.75%. This was the third meeting
in a row that the MPC had signalled
a tightening of monetary policy, taking
the Bank’s main interest rate back to its
Policymakers cited a strong labour
market and continuing signs of ‘robust
domestic cost and price pressures’ as
key reasons for the hike. Minutes to the
meeting also noted that Russia’s invasion
of Ukraine had led to ‘further large
increases in energy and other commodity
prices including food prices.’ As a result,
the BoE now expects inflation to reach
‘around 8% in April,’ almost a full percentage
point higher than it forecast in February
and four times its 2% target figure.
While the minutes did say that ‘some
further modest tightening in monetary
policy may be appropriate in the coming
months’ they also pointed to concerns
about the outlook for growth as
households struggle with a squeeze on
incomes. Indeed, analysts noted a more
dovish tone than was evident in the
previous set of minutes, with a distinct
softening of the language on the need
for future rate hikes.
Data subsequently released by the
Office for National Statistics (ONS), however,
showed that price rises continue to
exceed analysts’ expectations. In the 12
months to February, the rate of inflation
as measured by the Consumer Prices
Index, surged to a 30-year high of 6.2%.
This was significantly up on the previous
month’s rate of 5.5%, and 0.3% higher
than the median forecast in a Reuters
poll of economists.SFFS Economic Review_Mar 22