British interest rate hiked to 13-year high to contain inflation

Annual inflation will exceed 10% this year as a result of high energy prices (AFP)

To a 13-year high, the Bank of England raised its key interest rate on Thursday, as part of a global effort to rein in inflation caused by high energy prices, the Ukraine war and ongoing concerns about the Corona epidemic.

The bank increased the main interest by a quarter point to 1% amid high inflation that causes a living crisis in Britain, knowing that this is the fourth time in a row that the bank has decided to raise interest rates, noting that annual inflation will exceed 10% this year as a result of high energy prices.

The Monetary Policy Committee voted by 6 votes to 3 to raise interest rates for the fourth consecutive meeting, and raised the rate that the bank pays to other banks by a quarter of a percentage point, to 1%, while the minority voted to raise the rate to 1.25%, knowing that 1% is the highest. Since 2009.

The decision comes a day after the US Federal Reserve stepped up its attack on inflation, agreeing to the largest interest rate hike in more than two decades and signaling that more is on the way. This prompted him, yesterday, Wednesday, to raise the main short-term interest rate by half a percentage point to a range between 0.75% and 1%.

Other central banks around the world, from the Gulf to Sweden to Australia, have also begun to take similar action.

Rising consumer prices in Britain have exacerbated a cost-of-living crisis, marked by rising energy bills and rising food and transport prices, while the central bank struggles to show it is serious about curbing inflation without acting too aggressively to undermine consumer confidence.

The Associated Press quoted an investment note for the head of foreign exchange and interest rates at Investec. Dimitri Theodosio, An “The Bank of England has a difficult task due to inflationary pressures from external factors that are rising, and with the yelling (higher and higher) in the ears, comes the knowledge that excessive intervention may damage the economy.”

Britain’s inflation rate rose to a 30-year high of 7% in March, more than 3 times the central bank’s 2% target, while economists expect inflation to reach 9% or more later this year.

The minutes of the central meeting stated that “global inflationary pressures increased in the wake of the Russian invasion of Ukraine” and will be reflected on British households in October with the increase in electricity prices, which will contribute to an increase in inflation to 10% in the fourth quarter.

He warned that he expects the gross domestic product to contract in the fourth quarter, as well as a 0.25% contraction of the economy in 2023, according to “AFP”, which indicated that the value of the pound sterling fell 1.5% against the dollar after the decision to raise interest rates today, Thursday.

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