Bank of England Raises Interest Rate for First Time in Three Years to 4%
Bank of England Raises Interest Rate to Counter Rising Energy Inflation
Translated by Qiyas from الجريدة — Original source
The Bank of England announced on Thursday that it had raised interest rates for the first time in three years, citing renewed inflationary pressures driven by higher energy costs.
In its regular report, the Monetary Policy Committee (MPC) stated that it had decided to raise interest rates by a quarter of a percentage point to 4%, noting that the rate hike was supported by all nine committee members, with one member voting instead for a 4.25% increase.
The committee justified the rate hike by pointing to underlying inflationary pressures, primarily stemming from rising energy prices and their negative impact on businesses and households. It noted that the ongoing conflict in the Middle East, now entering its ninth month, is the biggest factor driving up global energy prices, which were already at elevated levels.
In this regard, the report highlighted that the UK’s inflation rate rose to 3.5% in September last year, with expectations for it to reach around 5% by mid-next year before declining again as the impact of higher energy prices begins to fade.
It further explained that the effect of overseas conflicts on global energy prices remains the main source of uncertainty surrounding inflation forecasts in Britain, adding that the Monetary Policy Committee remains committed to exercising caution regarding indirect effects that could sustain inflation, while taking into account any potential changes arising from weak economic activity.
