Bank of England Raises Interest Rates to 1%, Warns of Recession

    Photo: EPA [via The Guardian]

    The Facts

    • Amid warnings of a recession, the Bank of England (BoE) raised interest rates from 0.75% to 1% on Thu., marking their highest levels since 2009.

    • The Monetary Policy Committee approved the 25-basis point increase by a majority of 6-3. The minority voters pushed for a higher increase of 50-basis points.


    The Spin

    Establishment-critical narrative

    Just like the US Fed, bankers in the UK have acted too slowly to raise interest rates. The BoE is now forced to overcompensate with measures that fail to meaningfully reduce price hikes and run the risk of stagflation.

    Pro-establishment narrative

    The BoE is in the tricky position of having to balance the need to control inflation against a desire to protect an increasingly fragile economy. To be overly aggressive could push the economy into a recession, but to do nothing could also be damaging. Following a policy of gradual increase walks down the middle, and will buy the BoE some time.

    Narrative C

    UK financers have acted with greater caution than Fed officials because, unlike the US' strong labor market and impending demand shock, consumer spending looks to be rapidly slowing in Britain. Developments overseas are chilling demand, and inflation is set to hit the UK later than other nations.

    Nerd narrative

    Inflation will be 5.74% in the US in 2022, according to the Metaculus prediction community.


    Establishment split

    CRITICAL

    PRO

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