Bank of England announces biggest rate hike in 30 years

Today, November 3, the Bank of England announced on raising the base refinancing discount rate from 2.25% to 3%, a record high since 2008. The 0.75% rate hike was the highest for the Bank of England since 1989.

This decision was expected by market participants against the backdrop of persistently high inflation. September in the UK prices rose by 10.1%. Thus, in September, the key inflation indicator returned to the level of July this year, when the 40-year record in terms of annual inflation. Food, non-alcoholic beverages and energy remain drivers of price growth. The bank did not rule out that in the fourth quarter inflation could come closer to 11%, which, however, “will be lower than forecasts in August largely due to the impact of the government’s restrictive measures on energy prices.”

In its statement, the Bank of England confirmed the assumptions of many analysts that in the future it is set to increase the rate more smoothly. The bank emphasized that today’s decision of the Monetary Policy Committee was adopted by seven votes to two – one member of the committee proposed to raise the rate by 0.25%, the second – by 0.5%. In addition, the bank said that in the future it may raise the rate again, “but not as close to the peak values ​​that can be built into the behavior of financial markets.”

Evgeniy Khvostik