London The British central bank is raising interest rates again in the fight against skyrocketing inflation. The Bank of England (BoE) raised the key rate by a quarter point to 1.25 percent on Thursday. This is the fifth rate hike in seven months.
The decision was made by a vote of six to three, with three currency watchdogs unsuccessfully calling for an even larger step to 1.50 percent. Earlier on Wednesday evening, the US Federal Reserve had raised the key interest rate by an unusually large amount of 0.75 percentage points in order to curb inflation. This was the largest interest rate hike in the US since 1994.
The Bank of England said it was ready to act “forcefully” to contain the threat posed by high inflation. In December, it was the first among the leading central banks to raise interest rates since the corona pandemic. This was followed quickly by further interest rate hikes.
Bank of England rate hike increases selling pressure on sterling. The British currency extended losses on Thursday afternoon, trading at $1.2069. The pound’s weakness, exacerbated by this decision, does not exactly serve to solve the inflation problem, said Naeem Aslam, chief market analyst at brokerage firm AvaTrade. This made imports more expensive.
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The central bank wants to use this to fight the strong inflation, which according to its new forecasts could now be just over eleven percent in October. In April, UK inflation hit a 40-year high of 9%.
More: Largest rate hike since 1994: US Federal Reserve raises interest rates by 0.75 percentage points