10th February 2022
At its latest meeting held in early February, the MPC sanctioned a quarter of a percentage point rate rise taking Bank Rate to 0.5%. In what was a surprise split decision, however, four of the nine-member committee voted for a larger hike, seeking to raise rates by half a percentage point.
The decision to increase rates is designed to contain the country’s spiralling rate of inflation, which the Bank now expects to peak at around 7.25% in April. This would represent the fastest rate of consumer price growth since 1991 and would leave inflation significantly above the Bank’s 2% target level.
Data subsequently released by the Office for National Statistics (ONS) showed that inflation, as measured by the Consumer Prices Index, rose to 5.5% in the 12 months to January, putting the cost of living at a near 30-year high. This figure was above most predictions in a Reuters poll of economists, with the consensus suggesting the rate would hold steady at the previous month’s level of 5.4%.
The latest inflation statistics appear to have reinforced the chances of a third consecutive rate rise at the conclusion of the MPC’s next meeting on 17 March. The minutes from February’s meeting acknowledged that the Bank expects ‘further modest tightening in monetary policy’ to be appropriate ‘in the coming months’ and, according to a Reuters poll, most economists now predict a quarter percentage point rise in March. Furthermore, almost half of respondents also forecast a similar hike at May’s meeting.