(BoE) The Bank of England has further accelerated its policy tightening by voting to increase the bank rate by 0.25 percentage points to a higher 0.5%.
The central bank’s Monetary Policy Committee also approved a decision to begin reducing the stock of government bond purchases by stopping reinvesting maturing assets.
The hike happened after another rise in December, which took the interest rate to 0.25%, up from the pandemic lows of 0.1%.
The move by the Bank of England is seen as an attempt to control surging inflation which hit a 30-year high in December on the back of high energy prices and supply issues.
The central bank officials now anticipate inflation to peak at 7.25% in April, a higher projection from the earlier rate of 6%.
Berenberg Senior Economist Kallum Pickering says the quantitative tightening announcement may have caught the market by surprise, terming it as the most “sensible” action.
Pickering says that a normalization of the interest rate is not a threat to the UK economy, although he warns that markets may be caught by the timing or scale of any announcement.
FTSE 100 is down -0.25%, GBPUSD is up +0.18%.
