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Bank of England on the cusp of biggest rate hike since 1995

Banking And Finance

Bank of England on the cusp of biggest rate hike since 1995

The Bank of England (BoE) is expected to raise interest rates by the most since 1995, even as the risks of a recession mount, in an attempt to halt a surge in inflation from becoming embedded in Britain’s economy.

Most inventors and economists predict the BoE will increase its benchmark rate by half a percentage point to 1.75%, its highest level since late 2008 at the start of the global financial crisis when it announces its decision at 1100 GMT.

The UK’s primary inflation rate has soared to 9.4%—and could hit 15% in early 2023, according to the Resolution Foundation think-tank—as the repercussions of Russia’s invasion of Ukraine combine with post-pandemic strains on the world economy.

The Bank of England, which has already raised borrowing costs five times since December, said it would act if inflation pressures became more persistent in June.

Since then, inflation expectations among the public have eased off a bit, and the pricing plans of companies have also moderated, potentially giving the Monetary Policy Committee a case for sticking to its quarter-point rate moves.

Signs of a slowdown in the global economy are multiplying, core inflation fell in the latest data, and the central bank’s new forecasts are likely to show inflation falling sharply in two and three years.

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