March 2, 2024

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Bank of England raises interest rates for the fifth time

Bank of England raises interest rates for the fifth time
The Bank of England said on Thursday it would raise the cost of borrowing by 25 basis points to 1.25% despite concerns that higher prices are already putting pressure on households and households. burden economic growth.

“Bank staff now expect GDP to decline by 0.3% in the second quarter as a whole, which is weaker than expected at the time of the May report,” the Bank of England said in a statement.

“Consumer confidence has fallen further, but other indicators of household spending appear to have stalled. Some indicators of business sentiment have weakened, although so far they have remained more resilient than indicators of consumer confidence and consistent with positive underlying GDP growth,” he added.

The central bank said three members of the Monetary Policy Committee wanted to raise interest rates by 50 basis points to 1.5% – which would have been the largest increase in 27 years – but the other six members lost their votes.

Soaring food and fuel prices have plunged millions of Britons into hurdles Worst cost of living crisis in decades. Annual consumer price inflation rose to 9% in April – it Highest level since 1992. The Bank of England now expects inflation to rise slightly above 11% in October.
Food research firm IDF said in a report Thursday that the price of groceries Elevations can exceed 15% during the summer. Banning the export of essential commodities, including palm oil from indonesiaAnd the war in Ukraine, which limited exports from the region, is among the factors that led to food price inflation, according to the report.

The British economy is in a dismal state. Gross domestic product contracted 0.3% in April, after a 0.1% decline in March, according to data from the Office for National Statistics. Output in all three major sectors – services, production and construction – fell for the first time since January last year.

The Bank of England’s decision comes a day after the United States’ decision The Federal Reserve raises interest rates 75 basis points to control inflation. This is the Fed’s biggest rise since 1994.

George Buckley, Nomura’s chief UK and Europe economist, told CNN Business that it was “understandable” that the Bank of England decided to raise rates more modestly than its US counterpart.

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Bank of England [thinks] Buckley said that the current high inflation will harm growth itself and ultimately lead to lower inflation in the future.

“The bank is struggling with rising inflation, but at the same time the risk of a recession – so it is understandable the differences of opinion in the committee now about how much tightening is needed,” he added.

Nicole Goodkind contributed reporting.