August 04, 2022 Thursday
Cairo – Masrawi:
On Thursday, the Bank of England raised interest rates by 50 basis points, the largest single increase since 1995, and predicted the longest recession in the United Kingdom since the global financial crisis, CNBC reported.
The sixth consecutive rise in interest rates lifts borrowing costs to 1.75% and marks the first half-point increase since the bank gained independence from the British government in 1997.
The monetary policy committee voted 8-1 in favor of a historic half-point hike since its previous meeting in May, citing rising inflationary pressures in the UK and the rest of Europe, according to the network.
“This largely reflects the doubling of wholesale gas prices since May due to Russian restrictions on gas supplies to Europe and the risk of further restrictions,” the MPC said in its accompanying report.
“As this fuels higher retail energy prices, it will exacerbate the decline in UK household real incomes and increase UK CPI inflation in the near term,” he added.
Britain’s energy regulator Ofgem raised the ceiling on energy prices by 54% from April to absorb higher global costs, but is expected to rise further in October, with annual household energy bills expected to exceed £3,600 ($4,396).
According to CNBC, the bank expects headline inflation to rise to 13.3 percent in October and remain elevated for most of 2023 before easing to its target of 2 percent in 2023.
BoE Governor Andrew Bailey promised last month that there would be no “conditions or reservations” on the central bank’s commitment to bring inflation back to its 2% target.
The Bank of England has released a gloomy outlook for economic growth, indicating that the recent rise in gas prices has led to another “significant decline” in the outlook for activity in the UK and the rest of Europe.
The MPC predicts that the UK will enter recession from the fourth quarter of 2022 and five quarters of recession in real household income after tax cuts sharply and consumption begins to contract in 2022 and 2023.
In its monetary policy report, the Monetary Policy Committee said, “Growth remains very weak by historical standards. The contraction in output and weak growth expectations largely reflect the significant negative impact of global energy and trade prices on real incomes of households in the Kingdom.” United”.
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