London, Thursday, 22 June 2023
During its meeting in June, the Bank of England increased its benchmark interest rate by 50 basis points to 5.0%, making it the 13th increase in a row.
This unexpected decision, made in an effort to tackle persistent inflation, exceeded market expectations for a modest 25 basis point rate hike and increased borrowing prices to their highest level since the 2008 financial crisis.
Additionally, policymakers have promised to deliver additional rate increases if the continuing inflationary pressures continue.
The most recent data showed that, contrary to expectations, British inflation surprisingly remained steady at 8.7% in the year to May, confounding estimates of a little fall to 8.4% and maintaining far above the central bank's objective of 2%.
In addition, the core inflation rate increased to 7.1%, the highest level in 31 years. The rate hikes were started by the Bank of England about a year and a half ago, making it the first significant central bank to do so and causing the fastest policy tightening in more than 30 years.
(Source: Bank of England // Edit by: The Decision Maker - Finance editors)