Bank of England raises interest rate to combat inflation

• The Bank of England raised interest rate on Thursday to 0.5%

• The Bank of England also raised its inflation forecast to 7.25%

The Bank of England raised interest rate on Thursday to 0.5% as the central bank is working to contain the surging inflation.

Five of the nine members of the Monetary Policy Committee voted to raise rate to 0.5% while the others voted to increase rate to 0.75%.

The bank increased the rates in December as well to 0.25% from its historic low of 0.1%. Inflation soared to 30-year high in December due to supply chain issues and higher energy costs.

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Inflation forecast

The Bank of England also raised its inflation forecast on Thursday to 7.25% from the 6% projected in December.

In U.K., the labor market is on the path of recovery as 184,000 employees were added to payrolls in December.

MPC said in its report that any further changes in monetary policy will be dependent on the medium-term prospects for inflation.

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“The MPC judges that, if the economy develops broadly in line with the February Report central projections, some further modest tightening in monetary policy is likely to be appropriate in the coming months,” it said.

“The Committee continues to judge that there are two-sided risks around the medium-term inflation outlook, primarily from wage developments on the upside and from energy and global tradable goods prices on the downside.”

Picture Credits: Reuters