Bank of England raises interest rates amid inflation

• BOE’s interest rate was hiked to 0.25% from 0.1%

• The pound rose 0.75% against the dollar to $1.336

The Bank of England hiked its interest rate due to increasing inflation, becoming the first major central bank to hike rate since the beginning of the pandemic.

Central bank’s Monetary Policy Committee voted eight to one in the favor of tweaking the rate to 0.25% from 0.1%. 

The announcement comes amid the rising Covid-19 cases in the UK due to Omicron variant. A day ago, the U.S. Federal Reserve also indicated to increase rates in the coming year.

Several economists do not agree with decision because of the economic uncertainty in the country due to Omicron variant.

Also Read: Reddit, a social media platform, confidentially files for IPO

The pound rose 0.75% against the dollar to $1.336. According to FactSet, yields on one-year U.K. gilts rose 0.13 percentage points to 0.36%.

“The decision at this meeting was finely balanced because of the uncertainty around Covid developments,” the majority on the panel concluded, according to the minutes of their policy meeting published Thursday.

Also Read: McDonald's claws back $105 million from ex-CEO Easterbrook, settles lawsuit

“There was some value in waiting for further information on the degree to which Omicron was likely to escape the protection of current vaccines and on the initial economic effects of this new wave. There was, however, also a strong case for tightening monetary policy now.”

The increased benchmark rate of BOE is half a percentage point below compared to that of early 2020, before the beginning of the pandemic.

Picture Credits: Reuters