15th August 2022
At a meeting which concluded on 4 August, the BoE’s ninemember Monetary Policy Committee (MPC) voted by a majority of eight to one to raise Bank Rate by half a percentage point to 1.75%. This was the sixth increase since December and took rates to their highest level since late 2008.
Minutes to the meeting noted that inflationary pressures had ‘intensified significantly’ since the previous meeting held in mid- June, largely due to the impact of Russia’s invasion of Ukraine on
energy prices. A readiness to ‘act forcefully’ to indications of more persistent inflationary pressures was again reiterated, but the minutes also stressed that the MPC would assess its next move
as events unfolded and that policy was ‘not on a pre-set path.’
When announcing the rate decision, the Bank also provided an update of its view on the future path of inflation, warning that it now expects the Consumer Prices Index (CPI) to peak at ‘just over 13%’ in the final quarter of this year. It then expects inflation to remain at ‘very elevated levels’ throughout much of next year before returning to its target level of 2% in 2024.
Meanwhile, the latest data released by ONS showed that soaring food costs pushed the rate of inflation into double digits for the first time since 1982. In the 12 months to July, the CPI rate jumped to 10.1%, a sharp increase from June’s 9.4% figure and above all forecasts submitted in a Reuters poll of economists. This rise further fuelled expectations of another interest rate hike when the MPC next convenes in mid-September.