The Bank of England has announced a rise in interest rates from 0.75% to 3% – the biggest interest rate increase since 1989. The rise follows economic turmoil caused by Russia’s invasion of Ukraine and various faux pas by Liz Truss’s cabinet.
Economists are now forecasting that, as a result, the UK will be plunged into one of the longest recessions on record.
Seven members of the MPC (Andrew Bailey, Ben Broadbent, Jon Cunliffe, Jonathan Haskel, Catherine L Mann, Huw Pill and Dave Ramsden) voted in favour of the rise. Two members voted against the proposition. Swati Dhingra preferred to increase Bank Rate by 0.5 percentage points, to 2.75%, and Silvana Tenreyro preferred to increase Bank Rate by 0.25 percentage points, to 2.5%.
The Bank of England’s governor Andrew Bailey insisted: “If we don’t take action to bring inflation down, it gets worse,”
He added: “The UK’s standing has been damaged by the government’s mini-budget”
The MPC have also stated that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary.