Bank of England hiked its main interest rate for the fifth time in a row on Thursday, June 16, 2022, as it issues a warning of British inflation further and the rates reaching up to 11 per cent.
The United Kingdom is on the brink of seeing one of the highest inflation rates. Which are in Modern times according to sources. Also, U. K. inflation rates had soared to a 40-year high of 9% annually in the month of April. As the country is in a deep spiral over the rising food and energy crisis due to the Russia-Ukraine War.
In its May meeting, the Bank had raised its base rate by 25 points to 1.25% and had warned of the growing chances for the British Economy to fall into the clutches of recession, the highest level of global financial crisis since 2009. The Bank expects inflation rates to rise over 10% by the end of this year, as reported by CNBC Worldwide.
Bank of England hikes interest rate
Policymakers of BOE led by Andrew Bailey had talked about the fact that England might join the growing global trend of price hikes if inflation continues to grow, as he had remarked that, “it would be particularly alert to indications of more persistent inflationary pressures and would if necessary act forcefully in response.”
According to reports UK’s economy had further shrank in April by 0.3% after the economy shrank in March by 0.1%. The Organisation for Economic Cooperation and Development had predicted in its analysis. Lest, that the U.K.’s inflation will touch around 10% due to the lack of food, energy, proper labour, etc. It has also predicted that the economy will grow by 3.6% before stagnating in 2023.
Any evidence of dovishness, according to Laith Khalaf, head of investment analysis at British brokerage AJ Bell, might further undermine the currency.” By raising interest rates, the Bank is slowing an economy that’s already slowing on its own accord .” In a letter, Khalaf stated, “That risks the economy stalling, or worse, going into reverse.”
“It is quickly becoming apparent that more radical action is needed for the Bank of England to establish some sense of stability because tinkering around the edges simply isn’t cutting it,” as noted by Michael Hewson, chief market analyst at CMC Markets UK, to his clients.
The United Kingdom is not the only one in a race with higher interest rates. Moreover, US federal reserve had increased its interest rates by 75 basis points. Which was followed by the European Central Bank hinting at the increase in the interest rates. Further if conditions are not restored to normality soon. Switzerland Central bank also declared the increase in interest rates by 50 basis points. For the first time in 15 years.