Source Financial Post: January 10, 2020The Bank of England has raised interest rates to 0.5 per cent in an effort to boost the economy and boost growth, which has fallen sharply since the global financial crisis of 2008.
It said in a statement on Thursday that the decision to raise interest rates will ensure that inflation remains low, but also boost the recovery.
The central bank said it will continue to raise rates at the same rate as it has in the past, although it will gradually lower the rate to 0 per cent by the end of 2018.
The Bank also said it would introduce new rules to improve transparency and transparency-related lending, as well as other measures to protect the stability of the currency.
While the economy is benefiting from a sharp rise in the value of the pound, it remains uncertain how long the impact of the rate hike will last.
It is expected that inflation will be around 1.3 per cent this year, down from the 1.5 to 2.5 percent that is seen now.
There is also a question over whether inflation will slow down in coming years as the UK has yet to release its first quarterly GDP figures.
However, the Bank said it was confident that inflation would improve further in coming months, as inflation pressures are expected to fall further, which should boost the UK economy.
Britain’s inflation rate, which measures changes in the price of goods and services, was 0.4 per cent last month, according to the Office for National Statistics.
The latest figures showed that the UK’s real wages were 1.2 per cent higher in July than a year earlier.
Despite the Bank of Britain raising interest rates, economists warned that there were risks that inflation was likely to remain too high for the foreseeable future.
Andrew Haldane, economist at the think tank the Resolution Foundation, said: “The Bank has raised rates in an attempt to lift inflation, but the Bank has also increased its borrowing costs, and that will raise interest costs for the UK.”
It may be that the rate rise is not enough to offset these cost increases, or that the Bank may be more concerned about the inflationary impact of higher borrowing costs than the risk of higher inflation.
While the central bank will be raising rates for the first time since 2012, the risks are very real and it will be up to the next governor to see whether this rate rise helps to rein in the inflation that is causing the most distress for households and businesses.”