Interest rates rise again but Bank of England hints at a brighter future
GuardianFeb 02, 2023
Though it says inflation "is likely to have peaked," the Bank of England (BoE) on Thursday raised interest rates from 3.5% to 4% — a 14-year high — stressing that this hike was needed due to higher-than-expected private sector wage growth.
Seven of the nine Monetary Policy Committee members voted to increase the Bank Rate for the tenth consecutive time, with the bank's minutes, however, showing a softer tone after previously suggesting it would respond "forcefully" to inflation.
Though interest rates have been raised again — and output in Britain is still expected to shrink this year — prospects for the British economy are much better than in the immediate aftermath of Liz Truss's premiership. This measure may be seen as overprotective, but the UK's central bank deserves credit as it has been exceeding expectations while dealing with multiple shocks. Previous fears of a "Great Recession 2.0" should be replaced with hope.
The Ukraine war, pandemic, supply chain chaos, and labor shortages have not helped Britain's economy over the past years, but it's inconceivable that the BoE still refuses to take responsibility for its own mistakes. The inflationary spiral affecting the UK was created much earlier than these shocks because interest rates were kept close to zero for too long. Central planners should be honest with the public when their mistakes lead to life-altering cost-of-living crises.
There's a 50% chance that UK's annual inflation rate will be at least 6.63% by 2023, according to the Metaculus prediction community.