BoE hikes rate half-point as high inflation persists
The Bank of England on Thursday lifted its key interest rate by a half-point to five percent to tackle stubbornly high UK inflation despite such a move worsening a cost-of-living crisis. The higher-than-expected 13th hike in a row, to a 15-year peak, came one day after data showed UK annual inflation remaining at 8.7 percent to defy expectations of a slowdown. Prior to the data, markets had expected a smaller quarter-point increase following a regular policy meeting. "There had been significant upside news in recent data that indicated more persistence in the inflation process," the Bank of England (BoE) said in the gathering's minutes. A half-point hike was in stark contrast to the Federal Reserve, which last week pressed pause on US rate hikes after a sharp easing in the country's inflation. The European Central Bank last week raised its borrowing costs by a quarter point. The Swiss and Norwegian central banks also hiked their rates on Thursday. British Prime Minister Rishi Sunak has made slashing the pace of price rises a priority for his Conservative government as it heads into a general election next year. Traders anticipate UK interest rates will hit six percent by the end of the year, likely pushing Britain into recession. Sunak wants inflation reduced to five percent by the end of the year, or about half the level at the start of 2023. The BoE began lifting its key interest rate from a record low of 0.1 percent at the end of 2021, with inflation starting to creep up as economies slowly emerged from lockdowns. UK inflation went on to strike a 41-year peak at 11.1 percent in October on rampant energy bills, after major oil and gas producer Russia attacked Ukraine in early 2022. The BoE is tasked by the government to keep UK annual inflation close to a target of two percent. (AFP)