NewsBank base rate increased to 0.25%

Bank base rate increased to 0.25% (First increase in 3 years)

The Bank of England has raised the bank base rate for the first time in three years to 0.25%, despite concerns over omicron variant

 

At its meeting ending on 15 December 2021, the Monetary Policy Committee (MPC) voted by a majority of 8-1 to increase Bank Rate by 0.15%, to 0.25%.

This is the first increase in the base rate since 2018 and marks increasing pressure on the Bank as the inflation rate rises to 5.1%, with energy, food and second hand car prices, forcing up the cost of living.

The Committee voted unanimously for the Bank of England to maintain the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, at £20bn.  

‘The rate rise to 0.25% which increases the cost of borrowing, is aimed at dampening down demand and does risk sending already weak sectors further off course. But policy makers clearly see rampant inflation as an even more treacherous tide to deal with, with the CPI reading this week showing prices are already accelerating at levels not predicted until next spring.

‘Instead of battening down the hatches and waiting for the latest covid storm to subside, they are taking action now to prevent an even sharper spiralling upwards of prices.

The rise in interest rates had an immediate impact on the value of sterling.

‘Earlier Bank predictions talked about interest rates climbing steadily during 2022, hitting 1% by this time next year.

‘While the Bank reserves the right to slow the pace of the rate rises if the current wave of Covid-19 infections and restrictions hammer economic growth, today’s decision is a big statement of intent.

‘With consumer inflation at 5.1%, a 10-year high and two and half times greater than the Bank’s target, it is acting decisively to get inflation under control. For months the Bank has been hinting that rate rises were coming, and despite the Omicron fears, it has clearly concluded that it is now or never.’

Bank base rate increased to 0.25%
Bank base rate increased to 0.25%

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