Bank of England increases bank rate to 0.5%

The MPC sets monetary policy to meet the 2 per cent inflation target, and in a way that helps to sustain growth and employment.

The MPC also voted unanimously for the Bank of England to begin to reduce the stock of sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, by ceasing to reinvest maturing assets and by a programme of corporate bond sales to be completed no earlier than towards the end of 2023 that should unwind fully the stock of corporate bond purchases.

Beyond the near term, UK GDP growth is expected to slow to subdued rates. The main reason for that is “the adverse impact of higher global energy and tradable goods prices on UK real aggregate income and spending. As a result, the unemployment rate is expected to rise to 5 per cent and excess supply builds to around 1 per cent by the end of the forecast period,” the Bank of England said.

Meanwhile, the twelve-month CPI inflation rose from 5.1 per cent in November to 5.4 per cent in December, almost 1 percentage point higher than expected at the time of the November Report. “Inflation is expected to increase further in coming months, to close to 6 per cent in February and March, before peaking at around 7¼ per cent in April. This projected peak is around 2 percentage points higher than expected in the November Report,” the bank said.

“The projected overshoot of inflation relative to the 2 per cent target mainly reflects global energy and tradable goods prices. The further rise in energy futures prices meant that Ofgem’s utility price caps were expected to be substantially higher at the reset in April 2022. Core goods CPI inflation is also expected to rise further, due to the impact of global bottlenecks on tradable goods prices,” it added.

Fibre2Fashion News Desk (RKS)