A passageway near the Bank of England (BOE) within the City of London, U.K., on Thursday, March 18, 2021.
Hollie Adams | Bloomberg | Getty Images
LONDON — The Bank of England on Thursday hiked rates of interest by 50 basis points and dialed back a few of its previous bleak economic forecasts.
The Monetary Policy Committee voted 7-2 in favor of a second consecutive half-point rate hike, taking the major Bank rate to 4%, but indicated in its decision statement that smaller hikes of 25 basis points could also be within the cards in coming meetings. The 2 dissenting members voted to depart rates unchanged.
Crucially, the Bank also dropped the word “forcefully” from its rhetoric around continuing to lift rates as needed to rein in inflation.
“Annual CPI inflation is anticipated to fall to around 4% towards the top of this 12 months, alongside a much shallower projected decline in output than within the November Report forecast,” the Bank said.
U.K. inflation got here in at 10.7% in December, down barely from the previous month’s 41-year high of 11.1% as easing fuel prices helped to ease price pressures. Nonetheless, high food and energy prices proceed to squeeze U.K. households and drive widespread industrial motion across the country.
Thursday’s revised economic forecasts projected a shorter and shallower recession than previously expected.
The Bank previously forecast that the U.K. economy was entering its longest recession on record, but GDP unexpectedly grew by 0.1% in November after also exceeding expectations in October, suggesting that the upcoming recession might not be as long or as deep as previously feared.
Nonetheless, the International Monetary Fund on Monday downgraded its projection for U.K. GDP growth in 2023 to -0.6%, making it the world’s worst performing major economy, behind even Russia.
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