Bank of England Raises Interest Rates for Fifth Time, UK Inflation to Reach 11%
The Facts
The Bank of England (BoE) increased interest rates by 25 basis points (0.25 percentage points) to 1.25% on Thurs., bringing its main interest rate to a 13-year high.
The fifth hike since Dec. comes as the BoE announced it anticipates inflation will rise above 11% in Oct., with grocery price rises potentially topping 15% over the summer.
The Spin
Narrative A
The Bank of England is acting too modestly after it successively failed to foresee inflation rises. This is a new era of instability that demands more aggressive action to deter borrowing and strengthen the UK economy.
Narrative B
Today's central bankers don't have a choice, they have to raise interest rates gingerly to tackle inflation without wrecking economic growth. Although they are doing a thankless task, they will eventually be lauded for making the difficult but right decision that risks dampening the UK economy to protect long term stability.