Bank of England Hikes Rates to 4% Amid Cost-of-Living Crisis
The 0.25 percentage point increase defies forecasts of lower inflation and creates uncertainty regarding economic growth.
The Bank of England has raised interest rates to 4%. This 0.25 percentage point increase comes as households face a severe cost-of-living crisis.
The move caught some of the market by surprise. The Office for Budget Responsibility projects lower inflation and little momentum for wage growth in the coming years.
Official data shows that corporate profit margins have fallen from 14% to 11%. The productive sector has absorbed a large share of energy and fuel costs over recent months.
The Bank of England fears that the energy price shock will force a wave of wage adjustments. Such a trend could trigger a new inflationary acceleration in the years ahead.
The divergence between the Bank's projections and those of the budget watchdog highlights the fragility of the current economy. This scenario contrasts with the post-pandemic period and the start of the conflict in Ukraine.
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