The Bank of England
announced its largest interest rate hike ever 1992 on Thursday in an effort to combat the sky-high inflation that it said was sending Britain it into recession that would continue until mid-2024.
The BoE announced
after its regularly scheduled meeting that it was raising borrowing costs by 0.75 basis points to three percent.
The US Federal Reserve abruptly raised interest rates by 0.75 percentage points on Wednesday. And its chairman, Jerome Powell, hinted that rates will rise more than anticipated.
The BoE predicted that
would reach a top of 10.9 percent this year. But because the rate is so high, analysts believe it may reach as high as 5 percent in the near future.
According to the BoE, from the 3rd quarter, the economy has contracted. Entering a severe recession that is expected to persist through the first half of 2024.
On the assumption that the recession would endure for a long time, the pound fell 2% against the dollar
, chief market analyst at Avatrade, stated that “a standard textbook trade is out the window since currencies usually move higher whenever a central bank rises rates.”
Millions of People are expected to experience a worsening
cost-of-living problem as a result of the BoE rate increase.
As increases by central banks cause retail lenders to raise interest rates on their personal loans.
Early in 2020, when the Covid-19 outbreak started. The BoE cut its rate of interest to a record-low 0.1 % while simultaneously pumping enormous amounts of fresh money into the economy.
The Bank of England began raising interest rates in December of last year. And the increase on Thursday was the eighth consecutive round.