Friday 23 February 2024
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Bank of England raises interest rate by 0.25% to 1%

The Bank of England made the announcement today.

The MPC sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment.

At its meeting ending on 4 May 2022, the MPC voted by a majority of 6-3 to increase Bank Rate by 0.25 percentage points, to 1%.

Those members in the minority preferred to increase Bank Rate by 0.5 percentage points, to 1.25%.

Global inflationary pressures have intensified sharply following Russia’s invasion of Ukraine.

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This has led to a material deterioration in the outlook for world and UK growth.

These developments have exacerbated greatly the combination of adverse supply shocks that the United Kingdom and other countries continue to face.

Concerns about further supply chain disruption have also risen, both due to Russia’s invasion of Ukraine and to Covid-19 developments in China.

UK GDP is estimated to have risen by 0.9% in 2022 Q1, stronger than expected in the February Monetary Policy Report.

The unemployment rate fell to 3.8% in the three months to February, and is likely to fall slightly further in coming months, consistent with a continuing tightening in the labour market and with a margin of excess demand at present.

Surveys of business activity have generally remained strong.

There have, however, been signs from indicators of retail spending and consumer confidence that the squeeze on real disposable incomes is starting to weigh on the household sector. The level of GDP is expected to be broadly unchanged in Q2.

Twelve-month CPI inflation rose to 7.0% in March, around 1 percentage point higher than expected in the February Report.

The strength of inflation relative to the 2% target mainly reflects previous large increases in global energy and tradable goods prices, the latter of which is due to the shift in global demand towards durable goods and to supply chain disruptions.

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