LONDON (AP) 鈥� The Bank of England raised its main interest rate Thursday to a fresh 15-year high as it tries to bring down persistently high inflation, poised to bring more pain to people who are seeing rise during a cost-of-living crisis.
The quarter-percentage point increase to 5.25%, which was widely anticipated by economists, was the central bank鈥檚 14th hike in a row. The bank saidsome of the risks from more stubborn inflation, notably higher wages, had 鈥渂egun to crystallise,鈥� leading it to push borrowing costs higher.
There had been fears, certainly among and businesses, that the bank would repeat its outsized half-point increase from June. But figures last month showing that eased the pressure to act as aggressively again.
鈥淚nflation is falling and that鈥檚 good news,鈥� Bank Gov. Andrew Bailey said. 鈥淲e know that inflation hits the least well off the hardest, and we need to make absolutely sure that it falls all the way back to the 2% target.鈥�
With inflation four times that level, the bank is expected to hike again over the coming months, and it indicated Thursday that rates would need to stay higher for longer.
The and also raised rates last week, but they are thought to be nearer to taking a pause because inflation has come down more sharply than in the U.K. Price spikes have eased to 3% in the United States and 5.3% across the 20 countries that use the euro currency.
Central banks around the world have been raising borrowing costs to combat inflation unleashed by after Russia invaded Ukraine and supply chain backups as the global economy recovered from the coronavirus pandemic.
Higher interest rates help dampen inflation 鈥� but also 鈥� by making it more expensive for consumers and businesses to borrow to buy homes, cars or equipment.
Several reasons point to the U.K.鈥檚 higher inflation. Many economists blame , as Brexit impeded trade and raised costs for businesses. Others put more of the blame on the Bank of England itself 鈥� for being too slow in starting to raise interest rates, thereby allowing inflation to root itself more widely in the economy, most notably in higher wages.
Whatever the balance of blame, it鈥檚 been a particularly painful time for U.K. households whose mortgage rates or rents have skyrocketed while they struggle to make ends meet during a marked by higher costs for food and energy.
In forecasts accompanying the decision, the central bank said inflation is expected to drop to 4.9% by the end of the year, with set to moderate.
But for many, the pain has yet to hit. Unlike in the U.S., most homeowners in Britain lock in mortgage rates for only a few years, so those whose deals expire soon face the prospect of much higher borrowing costs.
Around 2.5 million such deals are due to expire by the end of next year, with around a million households facing a 500-pound ($640) monthly increase in their mortgage repayments by 2026, Bailey said.
鈥淎s a result, pass-through of the recent interest rate rises to outstanding mortgages has been limited so far,鈥� said Michael Saunders, senior economic adviser at Oxford Economics and a former rate-setter at the Bank of England.
On Thursday, two of the nine members of the rate-setting Monetary Policy Committee voted for a half-point increase, while six backed the quarter-point rise and one opted to keep rates unchanged.
Pan Pylas, The Associated Press
