Bank of England raises rates half a point to 5%, its highest level since 2008

The Bank of England raised interest rates by half a point on Thursday, from 4.5% to 5%, the highest level since 2008, in order to control year-on-year inflation in the United Kingdom, which last May stood at 8.7 %.

The entity announced its thirteenth consecutive rise in rates at the end of a meeting of its monetary policy committee, whose objective is to control inflation to place it at 2%.

The issuing bank opted to resort to this measure after knowing yesterday the disappointing data -worse than anticipated by analysts- for year-on-year inflation in this country, which continued last May at 8.7%, the same as in April, but still at levels “historically high”, according to the National Statistics Office (ONS).

After knowing the data, the British Minister of Economy, Jeremy Hunt, indicated in a statement that the Government has a “indisputable determination” to lower inflation, “since it is the only way in the long term to relieve the pressure on families with mortgages”.

“If we don’t take action now, it will be worse later”, warned the politician.

Hunt remarked that “high inflation is a destabilizing force that eats up payrolls and slows growth”.

“Core inflation – which does not depend on volatile elements such as energy or food – is higher in 14 EU countries and interest rates are rising all over the world, but the lesson from the other countries is that if you hold firm, lower inflation“, he pointed.

For his part, a spokesman for Downing Street – the seat of government – said today that the governor of the independent banking entity, Andrew Bailey, “still has the support of the prime minister”, RishiSunak.

“The Prime Minister believes it is important to continue to support the bank in the work they are doing”, pointed out the source.

The spokesperson observed that “there is a separate process for setting interest rates” and from the Executive, he pointed out, “we continue to work closely with them to bring down inflation”.

As for the increasingly repeated calls for the country to force a recession, Downing Street indicated that Sunak wants to “grow the economy”.

“The Prime Minister remains committed to bringing down inflation, growing the economy and reducing debtthe spokesman said.

He pointed out in relation to this point that the Government is aware that “you cannot have high growth with high inflation”, so they follow “working closely with the Bank of England” and putting “emphasis on reducing inflation”.

After the latest inflation data, various analysts predicted that rates will reach 6% at the beginning of 2024 -which would mean their highest peak in two decades- which, in turn, has triggered fears of the consequences for the increase of the cost of mortgages in this country.

The UK’s Institute for Fiscal Studies (IFS), an influential think tank, has warned that interest rate increases could cause nearly 1.4 million Britons with a mortgage to lose 20% of their available financial capacity.

However, the issuing bank has already warned that it will continue to choose to raise rates as long as it detects signs of inflationary pressure.

Source: EFE