July 18, 2024

Solid State Lighting Design

Find latest world news and headlines today based on politics, crime, entertainment, sports, lifestyle, technology and many more

Amid expectations of a recession, the Bank of England raises interest rates

Amid expectations of a recession, the Bank of England raises interest rates

This presents a challenge for many central banks, which are also rapidly raising interest rates in the face of the highest inflation in decades and potential recessions. on Wednesday, and Federal Reserve It raised interest rates by three-quarters of a percentage point – the fourth time in a row it has done so – and indicated more increases would come, although the pace would slow. last week , European Central Bank It raised interest rates three-quarters of a point as it said inflation could rise, but the bank stressed hard that the economy was weakening.

In Britain, there have been “significant developments” in fiscal policy since the bank’s last policy meeting six weeks ago, a statement said Thursday. The day after the previous meeting, on September 23, Ms Truss’s chancellor, Kwasi Quarting, announced a series of unfunded tax cuts that put British fiscal policy on a collision course with the bank’s monetary policy.

Two weeks ago, Ms Truss resigned, and her successor, Rishi Sunak, made it clear that he intended to take a different approach to public finances. Later this month, he and Chancellor of the Exchequer, Jeremy Hunt, are expected to announce tax increases and spending cuts along with a plan to cut Britain’s debt.

Since Britain changed leaders, many premiums on bond yields have fallen – the extra amount buyers are expected to pay due to increased risk – but not all of the impact from the latest wave of political and financial volatility has gone away. Mr. Bailey said. He added that liquidity in the markets has not returned to what it was, and “there has been a question about UK policy and that will have some lasting effect”. “We have to work hard to put that in the past.”

See also  3 dead and one missing due to rain in New Zealand's largest city

The bank said Thursday that the fiscal measures announced so far — including a freeze on energy bills, abolition of the health and social care tax and a cut in taxes on home purchases — will boost demand more than the bank expected three months ago.

Seven members of the bank’s nine-person rate-setting committee, including Mr. Bailey, voted in favor of a three-quarter-point rate increase, citing signs of strong domestic price and wage inflation that risks making high inflation more stable. For example, the labor market remains tight with more people remaining unemployed than expected, including due to long-term illness, which has pushed up wages, albeit not enough to offset inflation.

The other two on the committee voted to raise half a point and a quarter point each, arguing that the cost-of-living crisis required caution against excessive tightening and that monetary policy was already restrictive.