The Bank of England (BOE) increased the interest rate by 50 basis points at the Monetary Policy Committee meeting, which was postponed to today due to the death of Queen Elizabeth. The policy rate was increased from 1.75% to 2.25%. Thus, the highest interest rate after 2008 was passed.
The Central Bank made the first rate hike after the pandemic in December. In the 6 meetings of 2022, a total of 200 basis points increased interest rates.
While all 9 members of the MPC voted for an interest rate hike, 50 basis points was determined by 4 to 5 votes. MPC predicted that inflation will peak just below 11 percent in October. At the August meeting, it was predicted that inflation would peak at 13.3 percent in October.
REcession bells ring for england
The BoE lowered its GDP growth forecast for the third quarter from +0.4 percent to -0.1 percent, while predicting that inflation will remain above 10 percent for a few months before starting to decline. If this forecast comes true, the UK economy will contract for two consecutive quarters and meet the technical definition of a recession.
BOE MPC also agreed to start reducing the amount of government bonds in its portfolio after the meeting, as announced in August.
The bond position will be reduced by GBP 80 million per month over the next 12 months.
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