England, June 13, 2024
For the third time this year, the Bank of England has said that it is keen on increasing interest rates to tame inflation and bring order into the market. The change is a decision to raise the base rate upward starting from June 14, 2024, from the current 1%. 25% to 1. 5%.
It was done in light of fresh, persisting inflation risks and in line with the bank’s core mandate of achieving and maintaining low inflation. UK inflation has, therefore, been above the target range of 2% for several months, courtesy of the COVID-19 pandemic and other global supply shocks.
Inflation fear and balance of risk considerations prompted the Bank of England’s Monetary Policy Committee (MPC) to approve an increase in interest rates unanimously. The committee observed that the economy is set to lose the current month’s growth rate, quarter, and probably year growth rate. Still, for its determination to compress inflationary pressures, it increases the rate.
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A rise in interest rates is likely to translate across the economy with additional costs in borrowing from banks across the consumers and firms. It is for this reason that although interest rates can be used to address issues of inflation, this is often counterproductive because it will slow the economy and place additional strain on borrowers.
The Monetary Policy Committee of the Bank of England will, therefore, remain vigilant on the state of the economy and will always be ready to fine-tune the interest rates to achieve the desired rate of inflation as well as promote economic growth.
