To cushion inflation spikes, the UK raises interest rates to 4.5%.

AMPONTOONS.COM reporter, Namira Yunia Lestanti

AMPONTOONS.COM, LONDON – The Bank of England or the Bank of England (BOE) tightened its monetary policy again by raising its key interest rate by 25 basis points to 4.5% on Thursday (5/11/2023).

This increase is the 12th time BOE has made it in the past year.

Although the increase this time was recorded as the highest since October 2008, Bank of England Governor Andrew Bailey said in his official statement that this aggressive stance needs to be taken to reduce the inflation rate in England, which now it has risen to its highest level.

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UK food inflation increased to 15.7% last April, up 15.0% from the previous month. Meanwhile, the UK’s annual inflation rate is on the order of 10.1%.

Even before the BOE officially raised its latest key interest rate, the International Monetary Fund (IMF) forecast that the UK’s economic performance in 2023 would suffer a sharp decline, due to a 0.3% decline in the gross domestic product.

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This reason then drove the BOE Governor’s ambition to tighten monetary policy, following the steps taken by the US Federal Reserve, which raised interest rates by 0.25 percent last week.

“Inflation is still too high and our job is to get it to the 2% target and keep it,” Bailey said, quoted by The Guardian.

Through this tightening, Bailey estimated that UK inflation could fall to a low level. In this way, the economic base of The Black Country can function steadily and grow by 0.25% this year and 0.75% in 2024.

Whereas in recent months the BOE has forecast that the country will experience an economic slowdown or a prolonged recession until mid-2024. Because several UK economies continue to post significant declines.

“The economy may slump for an eighth consecutive quarter of negative growth, but we believe there will be a pick-up in growth once we enter mid-2024.” said the BoE at its end-2022 meeting.