London
CNN
—
The Bank of England raised UK interest rates by half a percentage point on Thursday, moving more aggressively than its US counterpart to fight inflation.
The central bank took rates to 4% — the highest level since the depths of the global financial crisis. UK inflation eased to 10.5% in December but remains near a 41-year high.
The Bank of England said inflation was likely to fall sharply over the rest of the year, largely as past increases in energy and other prices fall out of the calculation. But it signaled significant uncertainty over its forecast.
“The labor market remains tight and domestic price and wage pressures have been stronger than expected, suggesting risks of greater persistence in underlying inflation,” the bank said in a statement.
Wholesale energy prices might also boost UK inflation more than expected, it added.
The Bank of England had to weigh up current price growth against the risk of recession. On Tuesday, the International Monetary Fund forecast that the United Kingdom would be the only major economy to contract this year.
The UK rate hike followed a quarter-point interest rate rise by the Federal Reserve on Wednesday. In contrast to the Bank of England, the Fed has slowed the pace of its increases as US inflation is starting to abate.
The European Central Bank is also expected to hike rates for the 20 countries that use the euro by half a percentage point later on Thursday. Eurozone inflation fell in January but at 8.5% remains way above the ECB’s 2% target.
— This is a developing story and will be updated.
