STORY: The Bank of England just raised rates by the most in 27 years.
Thursday (August 4) saw its benchmark rate rise by a half percentage point to 1.75%. That’s its highest level since 2008.
Governor Andrew Bailey said policymakers were left with little choice:
"Returning inflation to the 2% target remains our absolute priority. There are no ifs or buts about that... The committee judged that a more forceful policy action was justified at this meeting, as there have been some indications that inflationary pressures are becoming more persistent and broadening to more domestically driven sectors.”
The increase comes even as the bank warns of a looming recession.
The BOE predicts the economy will shrink by just over 2%.
It expects the contraction to start later this year, and run right through 2023.
Despite the gloomy outlook, the bank is widely expected to raise rates again.
Markets have priced in another quarter-point hike for the next policy meeting in September.
Consumer price inflation is now forecast to peak above 13% in October, mostly due to surging energy prices as a result of the Ukraine conflict.
That would leave households facing two years of falling disposable income - the biggest such squeeze since records began in 1964.