With United Kingdom's inflation rates soaring to new highs due to economic recession caused by pandemic, the Bank of England has raised the interest rate for the first time in more than three years. The bank on Thursday said that its Monetary Policy Committee (MPC) had voted by a majority of eight to one to increase rate interest rates. Later, on the basis of the votes, the interest rates were raised by 0.15 percentage points to 0.25 per cent.
Key Points:
1. The declaration of the increase in the interest rates by the bank came as the inflation in the UK to 5.1 per cent in November from 3.1 per cent in September, wherein, the November inflation rates are the highest since September 2011.
2. The bank has said the inflation is expected to remain around 5 per cent through the majority of the winter period and it will likely witness an increase in April 2022 at approximately 6 per cent.
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3. Due to disruption in supply chains and labour shortages, the growth in multiple sectors remains restricted. Moreover, the rising Omicron covid variant cases in Britain will also impact the gross domestic product (GDP) in December and in the first quarter of 2022, the bank said.
4. The MPC committee will continue to focus on the medium-term prospects for inflation and judges that some modest tightening of monetary policy over the forecast period is likely to be necessary to meet the 2 per cent inflation target sustainably, the bank further said.
5. The bank has made two emergency cuts of the base rate from 0.75 per cent to 0.1 per cent to support businesses and households since the Covid-19 pandemic began, it added
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