The Bank of England (BoE) continued the trend of interest rate hikes following the US Federal Reserve and the European Central Bank (ECB).
The BoE increased its interest rate by 25 basis points to 4.25%, with 7 members voting for the rate hike and 2 members voting for the rate to be kept steady. The bank has now increased its interest rates by a total of 415 basis points across 11 meetings since December 2021.
In its decision statement, the BoE also addressed the banking crisis, stating that the Monetary Policy Committee had evaluated developments in the banking sector. The evaluation concluded that the UK banking system maintains strong capital and liquidity positions, and is well-positioned to continue supporting the economy across various economic scenarios, including periods of high interest rates.
The statement also noted that the recent developments have raised funding costs, and the impact of this on the economy and inflation is being closely monitored.
February’s inflation rate, which was announced yesterday, showed the fastest increase since October, rising by 1.1%. The annual inflation rate also increased from 10.1% to 10.4%. Despite the banking crisis, the BoE has prioritized its goal of reducing inflation, similar to the Fed and ECB.