On Thursday, The Bank of England announced its most significant interest rate rise since 1995, jumping from 1.25% to 1.75%. This move by the Bank of England comes a few weeks after the European Central Bank announced a similar interest rate hike.
The Bank of England committee voted on the matter, ending with an 8-1 vote favoring the 50% increased interest rate. The Bank continues to warn that the country is facing a recession that will last until at least next year, leaving the current state and future of the UK in limbo as wages for workers continue to decline and layoffs begin to take place.
From now on, Bank of England Governor Andrew Bailey is not optimistic. He and his committee expect inflation in the UK to continue until next year. The committee is not setting a number to increase rates; instead, they’re following the current situation and making decisions day by day.
The Bank estimates inflation to reach up to 13%, making it the highest rate in 42 years. If inflation continues to rise, it will hurt customers who are already struggling with prices that have reached over 9%.
The Bank and Bailey scapegoated, pinning Russia and its gas distribution cut to the UK and Europe for rising interest rates. However, easing concerns, the committee guaranteed the public that it would be ready to take action when Bailey said, “All options are on the table for our September meeting and beyond that.”
The Bank of England seemed to have a laser focus when it released a statement in its monetary policy report saying, “It’s our job to make sure that inflation returns to our 2% target, and that is what we will do.”