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Bank of England Raises Interest Rates to 2.25%

Facts

  • On Thursday, the Bank of England (BoE) raised its key interest rate by 50 basis points to 2.25% — the highest since 2008.[1]
  • This comes as the BoE forecast that the economy will shrink by 0.1% in the third quarter, which would be the second quarter in a row that the economy has contracted, meeting an informal definition of a recession.[2]

Sources

Spin

Establishment-critical narrative

Despite facing an inflation crisis that outpaces other major economic players, the BoE — which decided to raise rates only by 50 basis points rather than 75 — is lagging far behind and taking an overly cautious approach in its monetary tightening. This will only result in higher inflation for longer and an underperforming sterling.

Pro-establishment narrative

Amid the looming threat of a recession, the BoE's modest approach is the right one. The bank is in the tricky position of having to balance the need to control inflation against a desire to protect an increasingly fragile economy. Following a policy of gradual increase walks down the middle; the BoE can reassess at its next meeting.