The Bank of England (BoE or the central bank of UK) on Thursday, increased the interest rate by 0.5 to reach 5.25 percent, for the 14th time since December 2021 to help slow down inflation rates that reached 7.9 percent.
In a statement, the monetary policy committee at the BoE confirmed that six from its nine members voted to increasing the interest rates to reach 5.25 percent, one member voted to keep it unchanged.
It explained that stability of inflation rate didn’t reach this high number since April 2008, expecting that this rate will reach more than six percent by the end of this year, based on economic indicators linked to the performance of the domestic product and the flexibility of the labor market.
Inflation rates will not go back to its normal rates at two percent before the end of the second quarter of 2025, the committee added.
In the same context, the British Treasury Minister Jeremy Hunt described the inflation crisis as “the biggest challenge” that faces the British economy now.
“The government is firmly determined to solve the inflation crisis with all force and as soon as possible so that it does not worsen further in the future,” Hunt commented in a press release.
He explained that inflation causes an erosion of the value of salaries and pensions, in addition to impeding economic growth, recognizing that continuing to raise the interest rate constitutes an additional burden on mortgage holders.
Inflation, which reached last October 11.1 percent, caused the cost of living and the erosion of salaries, which led to comprehensive labor strikes not seen in Britain since the seventies of the last century.
British Prime Minister Rishi Sunak pledged early this year to reduce the inflation rate to five percent, while Jeremy Hunt predicted at the same time that the rate would fall to 2.9 percent before the end of this year, but experts began to doubt the possibility of achieving it.
Source: Kuwait News Agency
