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Tuesday, March 28, 2023

The Bank of England raised its base rate to the highest in 14 years

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The inflation of the United Kingdom fell in December to 10.5%although still at its highest level in 40 years. The increase in the interest rate seeks precisely to combat inflation.

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banks now they will have to pay a higher rate for the money they receive from the central bank, which means that loans to consumers and businesses will be more expensive.

This means that, although it may increase borrowing costs and add more pressure to many households already having trouble coping with rising mortgage costs, it can also help keep the prices of goods and services low.

However, this could could benefit savers in their deposits with longer fixed terms.

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Analysts, for their part, anticipated that rates will reach a peak of 4.5% in the summer before falling back to 3% at the end of 2023. Given the lags in the transmission of monetary policy, the increases in the bank rate since December 2021 are expected to have a growing impact on the economy in the coming quarters.

The Monetary Policy Committee (MPC) of the Bank of England established monetary policy to achieve the 2% inflation targetand in a way that helps sustain growth and jobs.

In its meeting that ended yesterday, the MPC voted by a 7-2 majority to raise the bank rate by 0.5 percentage points, to 4%, while two members preferred to keep the rate at 3.5%.

reported that the Global consumer price inflation remains high, although it is likely to have peaked in many advanced economies, including the UK. He explained that the wholesale gas prices recently fell, and the disruption to the global supply chain appears to have eased amid a slowdown in global demand.

As the Committee explained, domestic inflationary pressures in the United Kingdom were stronger than expected.

The inflationary scenario also has its social counterpart: almost Half a million British transport workers, teachers, civil servants and public sector employees joined the largest coordinated union protest in the last ten years on Wednesday in the European country, summoned to ask for salary increases in a context of inflation.

UK will enter recession

The BoE also concluded that the workforce did not return to its pre-pandemic size, different from other major economies.

This is mainly due to the early retirementthere are fewer European Union (EU) workers in sectors that are in critical shortage after Brexit, causing a drop in UK productivity.

The entity also predicted that the United Kingdom will enter a recession this yearbut said it will be shorter than previously thought.

He estimated that lEnergy prices and other costs continue to declinewhile the inflation rate will continue to slow, which means that companies can refrain from layoffs.

last week the IMF provided a bleak view of the UK’s economic recovery in the immediate future, estimating that the country will experience a 0.6% contraction in gross domestic product in 2023, making it the least successful economy among the seven largest countries. rich in the world

Source: Ambito

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