LONDON, June 17(ABC): The Bank of England on Thursday hiked its main interest rate for a fifth straight time, as it forecast British inflation to soar further this year to above 11 percent.
BoE policymakers agreed at a regular meeting to increase the cost of borrowing by a quarter-point to 1.25 percent, the highest level since the global financial crisis in 2009.
The pound slumped one percent against the dollar following the announcement, one day after the Federal Reserve hiked US interest rates far more aggressively to fight runaway consumer prices in the world’s biggest economy.
The BoE’s latest rise was in response to “continuing signs of robust cost and price pressures… and the risk that those pressures become more persistent”, said minutes of the UK meeting.
A minority of BoE policymakers had voted for an increase to 1.5 percent.
The Bank of England is avoiding “shock and awe tactics being employed across the Atlantic”, said Laith Khalaf, head of investment analysis at AJ Bell.
“Despite the UK starting to tighten monetary policy first, interest rates are now higher in the US.”
The US Federal Reserve on Wednesday announced the most aggressive interest rate increase in nearly 30 years — and said it is prepared to do so again next month in an all-out battle to drive down surging consumer prices.
The Fed’s rate hike of 0.75 percentage points comes after US inflation rocketed to 8.6 percent in May, the highest level in more than four decades.
In the UK, inflation stands at nine percent, the highest level in 40 years.
Prices are soaring worldwide as economies reopen from pandemic lockdowns and in the wake of the Ukraine war that is pushing already high energy costs even higher.