The Bank of England has raised interest rates for the seventh time since December to combat surging inflation.
In a statement, the Bank of England announced on Thursday that it would raise borrowing costs by 25 basis points to 1.25 percent despite concerns that rising prices are already squeezing people and dragging on economic development.
“Bank staff now expect GDP to fall by 0.3% in the second quarter as a whole, weaker than anticipated at the time of the May Report. Consumer confidence has fallen further, but other indicators of household spending appear to have held up,” a portion of the Bank of England’s statement read.
Some corporate sentiment measures have declined, while they have remained more resilient than consumer confidence indicators and consistent with positive underlying GDP growth.
Three members of the central bank’s Monetary Policy Committee wanted to raise rates by 50 basis points to 1.5 percent, the largest hike in 27 years but were outvoted by the other six members.
Food and fuel prices have risen dramatically, putting millions of Britons in the biggest cost-of-living crisis in decades.
In April, annual consumer price inflation hit 9%, the highest level since 1992. Inflation is expected to surge slightly above 11% in October, according to the Bank of England.
The Bank of England’s decision came just one day after the US Federal Reserve hiked interest rates by 75 basis points to combat inflation. This is the Fed’s biggest increase since 1994.
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