The Bank of England forecasts that this year the economy will grow by 0.25% compared to the February forecast of a contraction of 0.5%.
The Bank of England raised its key interest rate by 0.25 percentage points due to record inflation. at 4.5%, the highest since 2008. This was reported by Reuters.
It noted that the central bank no longer foresees a recession, revising its growth forecasts from gloomy data released in February. But now he also expects inflation to fall more slowly than expected, mainly because of an unexpectedly large and sustained rise in food prices.
The Bank of England is the first major central bank to start raising borrowing costs in December 2021, but critics have accused it of not being aggressive enough as inflation hit a four-decade high of 11.1% in October.
Last week, the US Federal Reserve and the European Central Bank reportedly raised their benchmark lending rates by 25 basis points.
Britain’s high inflation is largely due to its heavy reliance on natural gas imports to generate electricity, making it particularly vulnerable to increases in energy prices following Russia’s invasion of Ukraine.
Currently, energy prices have fallen sharply, and the central bank expects inflation to fall to 5.1% by the end of this year from 10.1% in March. However, this was a smaller decline than the fall to 3.9% forecast in February. As the Bank of England predicts, inflation will not return to its target level of 2% at the start of 2025.
The bank noted that higher food price forecasts added about one percentage point to future inflation compared to February.
“Wage rates may stabilize above those consistent with the 2% inflation target in the medium term,” the central bank said.
According to bank forecasts, this year the economy will grow by 0.25% compared to the February forecast of a contraction of 0.5%. The reasons are cheaper energy, fiscal stimulus, and improved business and consumer confidence. And within three years, the economy will grow by 2.25% compared to the previous period.
It was earlier reported that the Bank of England raised the rate for the 11th time in a row.
Remember, the European Central Bank has also raised rates to fight inflation.
Source: korrespondent
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