Trapped between high inflation and an economy on the brink of recession, the Bank of England (BoE) has once again increased the UK interest rate, taking the figure to 5.25%.
The Bank’s Monetary Policy Committee (MPC) voted on the 0.25% increase with a vote split. Two members preferred to increase the bank rate by 0.5% to 5.5% to “lean more actively” against inflation persistence.
Meanwhile, one member voted to maintain the bank rate at 5%, arguing that there was no longer a strong case for tightening monetary policy futher.
The announcement follows some relative relief to the UK economy, with annual inflation dropping from 8.7% in May to 7.9% in June. While inflation is still a far cry from the BoE’s 2% target, the recent easing of inflation pressure will likely be seen as justification for the BoE’s aggressive increases in the bank rate.
Commenting on the MPC’s decision, Chancellor Jeremy Hunt said:
“If we stick to the plan, the Bank forecasts inflation will be below 3% in a year’s time without the economy falling into a recession. But that doesn’t mean it’s easy for families facing higher mortgage bills, so we will continue to do what we can to help households.”
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