Bank of England hikes rates by 50 basis points, now sees 'much shallower' recession than feared
Last edited Thu Feb 2, 2023, 11:18 AM - Edit history (1)
Source: CNBC
LONDON — The Bank of England on Thursday hiked interest rates by 50 basis points and dialed back some of its previous bleak economic forecasts.
The Monetary Policy Committee voted 7-2 in favor of a second consecutive half-point rate hike, taking the main Bank rate to 4%, but indicated in its decision statement that smaller hikes and an eventual end to the hiking cycle may be in the cards in coming meetings. The two dissenting members voted to leave rates unchanged at this meeting.
Crucially, the Bank also dropped the word “forcefully” from its rhetoric around continuing to raise rates as necessary to rein in inflation. It sees a forthcoming easing in the annual Consumer Price Index: “Annual CPI inflation is expected to fall to around 4% towards the end of this year, alongside a much shallower projected decline in output than in the November Report forecast,” the Bank said.
“In the latest modal forecast, conditioned on a market-implied path for Bank Rate that rises to around 4½% in mid-2023 and falls back to just over 3¼% in three years’ time, an increasing degree of economic slack, alongside falling external pressures, leads CPI inflation to decline to below the 2% target in the medium term.”
Read more: https://www.cnbc.com/2023/02/02/bank-of-england-hikes-rates-by-50-basis-points-turns-less-bleak-on-the-economy.html
Article updated.
Original article -
The Monetary Policy Committee voted 7-2 in favor of a second consecutive half-point rate hike, taking the main Bank rate to 4%, but indicated in its decision statement that smaller hikes of 25 basis points may be in the cards in coming meetings. The two dissenting members voted to leave rates unchanged.
Crucially, the Bank also dropped the word “forcefully” from its rhetoric around continuing to raise rates as necessary to rein in inflation. “Annual CPI inflation is expected to fall to around 4% towards the end of this year, alongside a much shallower projected decline in output than in the November Report forecast,” the Bank said.
U.K. inflation came in at 10.7% in December, down slightly from the previous month’s 41-year high of 11.1% as easing fuel prices helped to ease price pressures. However, high food and energy prices continue to squeeze U.K. households and drive widespread industrial action across the country. Thursday’s revised economic forecasts projected a shorter and shallower recession than previously expected.
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