BoE raises Bank Rate by 50bps to 4.00% as widely expected. The decision was made by 7-2 votes. Swati Dhingra and Silvana Tenreyro voted for no change again, as in December. Known hawk Catherine Mann consented this time.
In the accompanying statement, BoE noted that “domestic inflationary pressures have been firmer than expected”. Still the bank expects that rate hike since December 2021 to have an “increasing impact on the economy in the coming quarters”.
In the new economic forecasts, annual CPI inflation is expected fall from current 10.5% to around 4% towards the end of the year. Also, conditioned on interest at around 4.50% in mid 2023 and falls back to 3.25% in three years time, CPI will decline to below 2% target in the medium term.
Also, the economy is expected to have a “much shallower” recession than prior expected. Calender -year GFP growth is expected to be at -0.50% in 2023 and -0.25% in 2024 only.