Bank of England hikes interest rates 50 basis points as it battles to tame soaring inflation and prop up the plummeting pound
- The Bank of England hiked interest rates by 50 basis points Thursday.
- It's trying to curb soaring prices, with UK inflation running close to a four-decade high at 9.8%.
The Bank of England hiked interest rates by 50 basis points Thursday as it stepped up its efforts to bring soaring inflation under control.
The UK's central bank upped its base lending rate to 2.25% in an effort to curb price rices. UK inflation is running close to a four-decade high at 9.8% — nearly five times the bank's target of 2%.
The central bank is also trying to support the British pound, which has slid to fresh 37-year lows against the dollar on concerns about the UK economy and tax changes expected Friday.
"With the inflation forecast actually cut back slightly perhaps there is ground for the Bank of England's hawkishness to drop back a touch," IG Group's chief market analyst Chris Beauchamp said. "Once again the bank's caution has hit sterling, which has dropped again following the decision."
The pound was trading up 0.17% at $1.1287 at last check Thursday, falling back from $1.1360 just before the bank's decision.
The bank's monetary policy committee voted 5 to 4 in favor of raising rates by 50 basis points. It also voted unanimously to trim its stock of purchased UK government bonds by 80 billion pounds ($90 billion) over the next twelve months.
The bank's decision comes after the Federal Reserve hiked interest rates by 75 basis points for a third time in a row Wednesday, as it also battles to tame soaring inflation in the US.
The Federal Open Market Committee raised interest rates by three-quarters of a percentage point on Wednesday, marking the third consecutive hike of that size. The increase is three times larger than the Fed's typical uptick and extends a streak of aggressive hiking that aims to cool demand throughout the economy and pull inflation lower.