BoE Nudges Rates Up Again But Says It's Ready To Act Forcefully

• The Bank of England stuck to its gradual increases in interest rates on June 15, 2022, as other Central Banks such as the US Fed, took more urgent action. It increased its Bank Rate by another 25 basis points even as it warned that Britain's economy would shrink in the April-June quarter. 
• The Monetary Policy Committee voted 6-3 for the hike to 1.25%, the same breakdown as in May with the minority voting for a 50 basis-point increase. Britain's benchmark rate is now at its highest since January 2009, when borrowing costs were slashed as the global financial crisis raged. It was the fifth time the BoE has raised rates since December when it became the first major central bank to tighten monetary policy following the COVID-19 pandemic. 
• The BoE continues to raise rates even though it has warned a sharp economic slowdown is coming, because consumer price inflation hit a 40-year high of 9% in April, more than four times the BoE's 2% target. The central bank has said that inflation would peak slightly above 11% in October when energy bills go up again. 
• Britain's inflation surge looks set to last longer than in many other economies, partly reflecting its mechanism for domestic power tariffs but also because of the hit to trade. Further, a chronic lack of workers to fill vacancies is worrying the BoE because it could lead to a jump in wages that further feeds inflation.
• A fall in the pound in recent weeks, caused largely by rising interest rate expectations elsewhere, threatens to add to inflation pressure in Britain. The BoE said the sterling had been "particularly weak against the U.S. dollar".

 (Source: Reuters)