Bank of England Raises Rates Despite Doubts
Even though the turmoil surrounding Credit Suisse and other banks, the Bank of England proceeded with its rate hikes on Thursday, March 23, the central bank raised its benchmark rate by a quarter percentage point, marking its 11th consecutive increase since December 2021.
Inflation Pressures and Tight Job Market Drive Decision
The bank cited inflationary pressures and a tight jobs market as the primary reasons for the rate hike. Governor Andrew Bailey said he expects price rises to cool off rapidly, even with a surprise jump in the headline rate of inflation to 10.4%.
BoE Foresees Sharp Inflation Decline by Early Summer
Bailey stated, "We've seen signs of inflation peaking now, but of course, it's far too high. Now we think it will come down sharply, really, from the early summer onwards." He acknowledged recent news of increasing inflation but remained hopeful that the trend would reverse soon.
U.S. Federal Reserve Follows Suit with Rate Hike
The Bank of England's move comes after the U.S. Federal Reserve similarly raised rates on Wednesday. Chairman Jerome Powell emphasized the importance of controlling inflation for the long-term benefit of the people they serve.
BoE Remains Confident in U.K. Banking System Resilience
While both banks were widely expected to raise rates, doubts had surfaced amid global banking turmoil. Nevertheless, the Bank of England expressed confidence in the U.K. banking system's resilience on Thursday, noting the volatile moves but maintaining a positive outlook.
LATEST: Bank of England Governor Andrew Bailey has said there are signs that inflationary pressures are easing.
— Paryte (@Parytecom) March 23, 2023
BoE and Fed May Pause Further Rate Increases
Following the Fed's indication that it could pause further rate increases, the Bank of England also reiterated that it sees less urgency for additional hikes. Both central banks will closely monitor inflation and economic conditions as they determine future policy moves.
