75-Basis Point British Central Bank Rate Hike Decided by 7-2 Vote
November 3, 2022
The Bank of England’s Monetary Policy Committee voted 7-2 to lift the Bank Rate to 3.0%, its highest level in 14 years. The dissenting opinions favored smaller hikes of 50 bps by one and 25 bps by the other. This was the first time in over three decades that the Bank Rate has been raised by more than a half percentage point and it matches the size of the last three moves by the Fed. This month’s review of British monetary policy coincided with publication of the quarterly Monetary Policy Report. The statement explaining today’s action cites fiscal policy changes since August that have resulted in significant changes projected growth and inflation, as well as in the implicit future path of the Bank Rate that now suggests a cresting level of 5.25% next summer. That’s a far cry from a pandemic low of 0.10% that prevailed from March 2020 until December 2021. Officials hope that the rate will not need to go that high but concede that the “labor market remains tight and there have been continuing signs of firmer inflation in domestic prices and wages that could indicate greater persistence.” In contrast to the medium-term target of 2% that officials aim to restore within two years, CPI inflation rose in September back to August’s 485-month high of 10.1% and is likely to reach 11% this quarter. Officials project Britain in recession through late next year.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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