Bank of England hikes rates again
STORY: The Bank of England raised rates again on Thursday (May 11).
Its benchmark went up another quarter of a percentage point to 4.5%.
The increase comes as it battles the highest inflation of any major economy.
And governor Andrew Bailey said the central bank was ready to keep fighting:
“Low and stable inflation is the foundation of a healthy economy, and we have to stay the course to make sure inflation falls all the way back to the 2% target.”
UK inflation held above 10% in March, and the BoE now expects it to fall more slowly than it previously predicted.
That’s mostly due to big and persistent rises in food prices.
Wage growth also remains strong.
However, the bank is no longer predicting a recession, having revised growth forecasts sharply upwards.
“Six months ago we were expecting a shallow but long recession. Since then energy prices have fallen substantially, and economic activity is holding up better than expected. So today we are forecasting modest but positive growth and a much smaller increase in unemployment.”
Economists have generally been predicting that rates would stay on hold after this increase.
Markets aren’t so sure.
Following today’s move, interest rate futures now price in a peak of almost 5% in the autumn.
The future course of inflation is likely to decide whether that comes true.
