The Bank of England, Britain’s central bank raised the interest rate Thursday for the first time in more than three years amid surging inflation after cutting rate to record low during the COVID-19 pandemic.
The bank’s Monetary Policy Committee (MPC) voted by a majority of eight to one to increase rate by 0.15 percentage points, to 0.25 percent, at its meeting ending on Wednesday, the bank said in a statement.
The announcement came as annual consumer price index (CPI) inflation in Britain rose from 3.1 percent in September to a decade high of 5.1 percent in November. The bank expects inflation to remain around 5 percent through the majority of the winter period, and to peak at around 6 percent in April 2022.
Growth in many sectors has continued to be restrained by disruption in supply chains and shortages of labor, and the impact of the Omicron variant will push down on gross domestic product (GDP) in December and in the first quarter of 2022, the bank said.
The MPC committee will continue to focus on the medium-term prospects for inflation and judges that some modest tightening of monetary policy over the forecast period is likely to be necessary to meet the 2 percent inflation target sustainably, according to the bank.
The bank made two emergency cuts of base rate from 0.75 percent to 0.1 percent to support businesses and households since the COVID-19 pandemic began. The Office for Budget Responsibility forecast in October that the economy will grow at 6.5 percent this year, up sharply from the 4 percent predicted in March.
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