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Bank of England hikes rates by half-point

A majority of members of the Bank of England’s Monetary Policy Committee have voted to increase the base interest rate from 3.5 per cent to 4 per cent.

February 3, 2023
3 February 2023

The Bank of England has raised interest rates by half a percentage point as it seeks to tame double-digit inflation that is fuelling a cost-of-living crisis, public-sector strikes and fears of recession.

The bank’s monetary policy committee voted 7-2 to push its key rate from 3.5 per cent to 4.0 per cent, approving the 10th consecutive rate increase since a post-pandemic surge in the world economy and Russia’s war in Ukraine drove inflation to 40-year highs.

Economists suggest this may be the last big rate increase for the United Kingdom’s central bank as inflation begins to slow.

“The extent to which domestic inflationary pressures ease will depend on the evolution of the economy, including the impact of the significant increases in Bank Rate so far,” the bank said in a statement.

“There are considerable uncertainties around the outlook.”

The US Federal Reserve has already started tapering its response, boosting its key rate by just a quarter-point on Wednesday. 

The European Central Bank, meanwhile, is expected to go big again, with economists forecasting a half-point increase on Thursday.

Optimism grew that rate increases may begin to tail off after UK inflation eased for a second straight month to 10.5 per cent in December, down from a peak of 11.1 per cent in October – which is still far higher than in the US and the 20-country eurozone, where inflation slowed to 6.5 per cent in December and 8.5 per cent in January respectively.

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