Bank of England Raises Key Rate to 0.5%

The Bank of England (BOE) raised its key interest rate on Thursday and voted to reduce its pandemic stimulus as the central bank faces surging inflation.

During a monetary board meeting on Thursday, the central bank increased its policy rate to 0.5 percent, citing expectations of annual inflation to go above 7 percent in the following months due to low unemployment, rising wages and surging energy prices.

The move followed another rate increase during its last meeting in December, marking its first back-to-back hike since 2004.

The panel was split on whether to push the rate by 0.25 percentage points or 0.5, as some wanted a more aggressive stance to face inflationary pressures.

Votes were unanimous for the BOE to taper its bond-buying programs that acted as pandemic stimulus. The central bank added that it will stop reinvesting the cash it receives from maturing bonds in its portfolio.

The monetary committee signaled more rate increases ahead, saying it has decided that “some further modest tightening in monetary policy was likely to be appropriate in the coming months.”

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