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The Bank of England may raise the base rate to the maximum in 25 years


June, 26 2023
watermark Economic news

Analysts believe the Bank of England will raise the base interest rate to 6.25% per annum at the beginning of next year, which will be the highest level in the last 25 years.


Last week, the Bank of England raised the rate by 50 basis points, to 5% per annum, due to the continuing high level of inflation in the country. Most analysts predicted an increase of 25 bps. This is the thirteenth consecutive rate hike, and analysts note that the indicator has reached its highest level since the financial crisis of 2008.


Core inflation excluding the cost of energy, food, alcohol and tobacco in the UK rose by 7.1% in annual terms in May, which is the highest level since March 1992. At the same time, the growth rate accelerated compared to April, when it was 6.8%.


The Bank of England's decisive reaction to the statistics convinced investors that the regulator is likely to continue aggressively tightening monetary policy until there is a significant slowdown in consumer price growth.


Currently, the UK central bank makes interest rate decisions based on the latest inflation data and no longer relies on its forecasts. Experts believe that it will be difficult for the Bank of England to slow down the pace of rate hikes without a significant reduction in inflation or a sharp decline in the labor market. Therefore, many do not exclude the possibility that the rate will increase in increments of 50 bp.


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