Interest rates raised to highest level since 2008
The Bank of England has raised interest rates for the 12th time in a row, taking borrowing costs to the highest point since October 2008.
The Monetary Policy Committee (MPC) voted 7 to 2 to increase rates by 0.25 percentage points to 4.5%.
Interest rates have been rising since December 2021 in an effort to restrain prices by controlling inflation, which currently stands at 10.1%. The bank is targeted to keep inflation at 2%.
After experiencing “large and volatile moves in global financial markets” in March with the failure of Silicon Valley Bank and UBS’ purchase of Credit Suisse, the MPC says whilst risk remains “there is likely to be only a small impact on GDP from the tightening of credit conditions” related to the global banking sector.
It expects the UK’s GDP to be flat during the first half of 2023, but then projects it will grow “modestly”.
Economic activity has been stronger than the MPC expected in February, with the Committee saying that the improved outlook reflects “stronger global growth, lower energy prices, the fiscal support in the Spring Budget, and the possibility that a tight labour market leads to lower precautionary saving by households”.