BoE raises interest rate for first time in 3 yrs to tackle rising inflation

The Bank of England has raised the interest rate for the first time in more than three years amid surging inflation after cutting rate to record low during the Covid-19 pandemic.

The Bank of England (BoE) has raised the interest rate for the first time in more than three years amid surging inflation after cutting rate to record low during the Coronavirus (Covid-19) pandemic.

In a statement on Thursday, the bank said that its Monetary Policy Committee (MPC) voted by a majority of eight to one to increase rate by 0.15 percentage points, to 0.25 per cent, at its meeting ending on Wednesday, reports Xinhua news agency.

The announcement came as annual consumer price index (CPI) inflation in Britain rose from 3.1 per cent in September to a decade high of 5.1 per cent in November.

The bank expects inflation to remain around 5 per cent through the majority of the winter period, and to peak at around 6 per cent in April 2022.

Growth in many sectors has continued to be restrained by disruption in supply chains and shortages of labour, and the impact of the Omicron variant will push down on gross domestic product (GDP) in December and in the first quarter of 2022, the bank said.

The MPC committee will continue to focus on the medium-term prospects for inflation and judges that some modest tightening of monetary policy over the forecast period is likely to be necessary to meet the 2 per cent inflation target sustainably, according to the bank.

The bank made two emergency cuts of base rate from 0.75 per cent to 0.1 per cent to support businesses and households since the Covid-19 pandemic began.

The Office for Budget Responsibility forecast in October that the economy will grow at 6.5 per cent this year, up sharply from the 4 per cent predicted in March.