The Bank of England raises interest rates to 5.25%, the highest since 2008
Ammon – The Bank of England slowed the pace of interest rate hikes on Thursday as inflationary pressures receded, and left the door open to the possibility of future interest rate hikes, while awaiting confirmation that inflation and the labor market have begun to ease.
The Bank of England raised interest rates by 25 basis points to 5.25% in line with expectations, the highest rate since February 2008, after increasing them by 50 basis points at its previous meeting in June.
Markets are poised for interest rates to peak in the 5.75% range by the end of this year, well short of forecasts by almost a full point just a month ago.
The central bank’s move marks the 13th interest rate hike since the aggressive monetary tightening campaign to rein in inflation began in February last year.
The central bank’s decision came after Britain’s annual inflation rate fell more-than-expected in June to 7.9%, the lowest level in more than a year, compared to 8.7% in May. Core inflation also declined to 6.9% from 7.1% previously. Services inflation also declined to 7.2% in June, down from 7.4% in the previous month. The Bank of England is watching service inflation in particular closely for signs of price pressures arising from domestic factors.
Andrew Bailey, Governor of the Bank of England, hinted that interest rates may remain at peak levels for longer than traders currently expect.