Valentine Okafor
The Bank of England on Thursday announced another “forceful” increase in interest rates, saying it was too soon to declare victory against inflation that has slowed slightly but is still fueling a cost-of-living crisis, public-sector strikes and fears of recession.
The bank raised its key rate by half a percentage point, to 4 per cent, resisting the temptation to follow the U.S Federal Reserve in easing its response to the crisis. The British central bank has approved four straight increases of a half-point or more since Russia’s invasion of Ukraine had triggered sharp rises in food and energy prices.
“We have done a lot on rates already but it is too soon to declare victory just yet,” bank Gov. Andrew Bailey said at a news conference. “Inflationary pressures are still there … and we need to be absolutely sure that we really are turning the corner on inflation.”
Even so, the bank moderated expectations for further rate increases, dropping suggestions that it would respond “forcefully” to price pressures and implying that future moves would be smaller. Getting rid of that language was intentional and designed to send a signal to financial markets, Bailey said.
Central bankers worldwide are struggling to balance competing economic demands as they try to rein in inflation, which erodes savings and increases costs for consumers and businesses, without unnecessarily hurting economies that are still recovering from the effects of the COVID-19 pandemic.
