London, Thursday, 5 May 2022
The Bank of England hiked the benchmark Bank Rate by 25 basis points to 1% in May 2022, the fourth rate hike in a row, raising borrowing prices to their highest level since early 2009.
Although three members voted for a larger 50bps rise, the conclusion met expectations. Global inflationary pressures have risen substantially in the aftermath of Russia's invasion of Ukraine, according to policymakers, resulting in a material worsening in the outlook for UK GDP.
The UK economy is estimated to have grown by 0.9 percent in Q1, but GDP is expected to remain flat in Q2 and contract by around 1% in Q4, owing to a drop in household incomes, including that resulting from a projected 40% increase in retail gas and electricity prices when the Ofgem price caps are reset in October.
GDP is expected to contract by 0.25 percent in 2023. Meanwhile, inflation is predicted to grow steadily for the rest of the year, peaking at just over 9% in Q2 and averaging just over 10% in Q4.
(Source: Bank of England // Edit by: The Decision Maker)