The Bank of England (BoE) has raised the key interest rate in the United Kingdom by a quarter of a percentage point to its highest level in years. The central bank wants to combat inflation, which is still high despite the fastest rate hikes in three decades.
The British central bank was one of the first central banks to raise interest rates in December 2021 and has now raised them fourteen times in a row to a level of 5.25 percent. That is the highest interest rate in more than fifteen years.
The rate hike was in line with economists’ expectations. In the previous interest rate decision in June, the interest rate was raised by half a percentage point.
Central bank policymakers were not unanimous on the interest rate decision. Six of the nine directors voted for a rate increase of a quarter percentage point. Two would have preferred an interest rate hike of half a percentage point, and one director was against a further increase.
The BoE also stated its determination to bring inflation back to its target of 2 percent. The central bank thus leaves the door open for more rate hikes. The BoE also expects interest rates to remain high for a long time.
Although UK inflation has eased somewhat in recent months, prices are still rising sharply, and many households in the country are being hit hard by the higher cost of living. UK inflation fell to 7.9 percent in June from 8.7 percent in May.
Therefore, the country’s price increases are still considerably higher than in other major economies, such as the eurozone and the United States.