London, Sep 22 (IANS) The Bank of England has raised UK interest rates by 0.5 percentage points to 2.25 per cent in an attempt to combat soaring inflation amid the cost of living crisis, the media reported.
That’s the seventh consecutive increase in Bank Rate in a row, but a smaller rise than many investors had expected, The Guardian reported.
Today’s rate rise — the second 50bp increase in a row — shows that the Bank is trying to prevent inflation becoming persistently embedded, despite concerns over the economy.
The decision by the Bank’s monetary policy committee takes rates to the highest level since 2008, The Guardian reported.
The UK is already in recession, the Bank of England fears, partly due to the bank holiday to mark the Queen’s funeral.
Bank staff have downgraded their growth forecasts, and now predict GDP will shrink by 0.1 per cent in the third quarter of the year.
That would follow the 0.1 per cent drop recorded in April-June — making it the second quarterly contraction in a row.
A month ago, the Bank had predicted the economy would grow by 0.4 per cent in July-September.
But weaker-than-expected growth of just 0.2 per cent in July, and Monday’s bank holiday for the state funeral, have led it to slash its forecasts.