Bank of England Raises Interest Rates to 4.25%

The Bank of England (BoE) has hiked interest rates by another quarter of a percentage point and says it anticipates the surge in inflation to cool faster than before despite a surprise jump in price growth last month.

The UK’s central bank on Thursday raised its benchmark bank rate by 25 basis points to 4.25%. The BoE’s nine-member decision-making council voted seven to two in favor of the decision as it sounded more upbeat about the outlook for the country’s sluggish economy.

That was the central bank’s 11th consecutive increase in borrowing costs, which began in December 2021. Following on from the US Fed’s own 25-basis-point increase, the BoE’s Monetary Policy Committee made the decision to go for 25 basis points after the UK central statistics agency surprised policymakers on Wednesday by reporting that inflation accelerated to 10.4% in February, driven by the cost of food, clothing and dining out.

Analysts say the BoE is no longer predicting the UK economy will go into a recession. There is an expectation that the economy will grow slightly within the next year, a smallglimmer of hope.

Thursday’s increase was the smallest rate hike since June as the BoE forecasts a steep drop in inflation later this year. Inflation is expected to slow to 2.9% by the end of the year as energy costs drop and big price increases that were recorded last year fall out of the calculation.