Bank of England Raises Interest Rates Amid Brexit Worries
LONDON — The Bank of England raised interest rates on Thursday to their highest levels in nearly a decade as the idea seeks to tamp down inflation along with also make preparations for a potential economic downturn as Britain exits the European Union.
Policymakers at the central bank voted unanimously to raise the benchmark interest rate a quarter of a percentage point on Thursday, to 0.75 percent, the highest the idea has been since February 2009.
Before the decision, they had voiced concern about inflation which, at 2.4 percent, can be above the bank’s 2 percent target. along with also while wage growth appears to be relatively weak, the bank nevertheless anticipates an acceleration in cost rises because the lowest levels of unemployment since 1975 will probably force employers to pay more to retain staff. A public sector raise announced at the end of July could also bolster wages along with also, by extension, inflation.
In its quarterly inflation report, which accompanied the rate-setting meeting, the Bank of England said inflation was likely to fall slowly to about 2.1 percent in a couple years.
nevertheless while the bank officially made the move in an effort to tackle inflation, the idea also clearly had another goal in mind: To give the idea wiggle room to cut rates from the future, particularly if Brexit, as the withdrawal coming from the European Union can be called, deals a blow to the British economy.
Economists have warned which leaving the 28-nation bloc will have a negative impact on growth by restricting Britain’s access to its main trading partner. Those concerns have been amplified by a seeming lack of progress between London along with also Brussels on the post-Brexit trading relationship.
As a result, the central bank has sought to add levers which can be used if some measure of stimulus can be needed for the British economy.
“the idea’s cleaner for them to go right now,” said David Owen, chief European economist at the investment bank Jefferies, referring to the rate rise. Mr. Owen said which as Britain neared its withdrawal, due in March, the Bank of England could have less time to raise rates, along with also the political risks surrounding Brexit could be increased.
Like some other central banks, the Bank of England has sought to dial back monetary stimulus put in place after the financial crisis.
nevertheless its efforts have been complicated by Brexit. Soon after the vote to leave the European Union in June 2016, the bank cut its benchmark interest rate to 0.25 percent, the lowest rate in its history, along with also increased its bond-buying program.
the idea eventually lifted the rate in November last year, depicting the idea as a response to higher prices, nevertheless emphasizing which economic growth could remain sluggish. the idea has held back coming from further rises, however, after weak economic data at the beginning of the year prompted the bank’s monetary policy committee to wait along with also see how long such conditions could persist.
“Today’s rise in interest rates makes sense both coming from a short-term perspective along with also in terms of a sustainable long-term monetary strategy,” said Andrew Sentance, senior economic adviser at the professional services firm PricewaterhouseCoopers.