The central bank is stepping up the fight against inflation.
(Photo: dpa)
London The British central bank is bracing itself against escalating inflation with the largest rate hike in decades. The Bank of England (BoE) hiked key monetary policy rates by 0.75 percentage points to 3.0 percent on Thursday. It was the sharpest hike since 1989.
The ECB and the US Federal Reserve have recently repeatedly used this unusual level of interest rates to counteract the upward pressure on prices. The currency watchdogs in London reacted to the high inflation on the island, which was last at 10.1 percent, with the strong increase. They signaled that further rate hikes would be necessary.
In August and also in September, the BoE raised interest rates by 0.50 percentage points. The interest rate hike of 0.75 percentage points was now firmly expected on the financial markets.
At times, an increase of a full percentage point was even expected in the course of the financial market turbulence triggered by the economic plans of ex-Prime Minister Liz Truss. Truss had raised doubts about the viability of her financial plans, which led to severe turmoil in the financial markets. This forced the BoE to intervene in the bond market. After massive criticism, Truss resigned after just six weeks in office.
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Her successor, Rishi Sunak, is now changing course: he signaled that public spending should be cut and that higher taxes may need to be levied. Details should be in a financial report to be published on November 17th. After the turbulence on the financial markets subsided, the central bank was able on Tuesday to sell bonds from its own holdings as part of its monetary tightening course.
More: The US Federal Reserve raises interest rates by a further 75 basis points – signaling more flexibility