London
CNN Business
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The central bank of the United Kingdom increased interest rates For the fifth time since December to control rising inflation.
The Bank of England said on Thursday it would raise borrowing costs by 25 basis points to 1.25%, despite fears that rising prices are already squeezing homes and burden on economic development,
“Bank employees now expect a 0.3% decline in GDP in the second quarter, which is weaker than forecast for the May report,” the Bank of England said in a statement.
“Consumer confidence has fallen further, but other indicators of household spending appear to have stalled. Some indicators of business sentiment have weakened, although they remain more resilient than indicators of consumer confidence so far and in line with positive underlying GDP growth,” it added.
The central bank said three members of its monetary policy committee wanted to raise rates by 50 basis points to 1.5% – which would be the biggest increase in 27 years – but overtook the other six.
Rising food and fuel prices have pawned millions of Britons Worst survival crisis in decades, Annual consumer price inflation rose to 9% in April highest since 1992, The Bank of England now expects inflation to rise to a little over 11% in October.
Food research firm IDF said in a report on Thursday that the price of grocery In summer the increase can be above 15%. Export restrictions on key commodities, including palm oil from indonesiaThe report said the war in Ukraine, which has limited exports from the region, is among the factors driving food inflation.
The UK economy is in dire straits. According to data from the Office for National Statistics, GDP declined 0.3% in April after falling 0.1% in March. For the first time since January last year, output in all three core sectors – services, production and construction – declined.
The Bank of England’s decision comes a day after the US Federal Reserve hikes rates An increase of 75 basis points to bring inflation under control. This is the Fed’s biggest hike since 1994.
George Buckley, chief economist for UK and Europe at Nomura, told CNN Business that it was “understandable” that the Bank of England had decided to hike rates more modestly than its US counterpart.
“Bank of England” [thinks] that high current inflation will, in itself, stifle growth and ultimately bring down inflation in the future,” Buckley said.
“The bank is grappling with rising inflation, but at the same time there is a risk of recession – so it is necessary to understand the differences on the committee now about the scale of the tightening,” he said.
, Nicole Goodkind contributed reporting.