The Committee of Monetary politicsmade up of nine members, voted 6 to 3 in favor of raising the bank interest rate by 25 basis points, to 1.25%, the same distribution as in May, with a minority voting in favor of a rise 50 basis points.
The British benchmark rate is now at its highest level since January 2009. It is the fifth time the Bank of England has raised borrowing costs since December, when it became the first major central bank to tighten monetary policy following the onset of the COVID-19 pandemic.
But some critics say it is moving too slowly to prevent rising inflation from taking hold in wage deals and price expectations, hurting the economy in the long run.
“The scale, pace and timing of any further increase in the bank interest rate will reflect the Committee’s assessment of the economic outlook and inflationary pressures.“, added the BoE.
“The Committee will be particularly attentive to signs of more persistent inflationary pressures and, if necessary, will act vigorously in response.”
The BoE abandoned its May message, saying that most MPC members believed that “some degree of monetary policy tightening may still be appropriate in the coming months.”
Committee members Catherine Mann, Jonathan Haskel and Michael Saunders favored a larger increase of 50 basis points, as they did in May.
The economists surveyed by Reuters had forecast a 6-3 vote to raise rates to 1.25%, but investors increased their bets on a bigger move in recent days, with the British pound falling against the US dollar and following reports of that the Fed was considering a move of 75 basis points.
The Bank of England noted that the market path for UK interest rates had risen sharply since the May meeting, although there had been relatively little news since then.
Source: Ambito
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