Bank of England poised for rate hike following inflation shock

LondonCNN — 

The Bank of England is expected to hike rates by a quarter of a percentage point Thursday following an unexpected jump in inflation.

UK consumer prices surged by 10.4% in February compared with a year ago, the first acceleration in inflation in four months, as food prices soared and the cost of visiting restaurants and hotels increased.

The surprise uptick in inflation increases the likelihood that the central bank will raise rates for the 11th consecutive time, despite turmoil in the banking sector and concerns about weak economic growth in the United Kingdom.

Other major central banks are continuing to raise borrowing costs. The US Federal Reserve hiked rates by a quarter of a percentage point Wednesday. The European Central Bank increased its rates by half a point last week — even as markets were being roiled by the banking crisis — and the Swiss National Bank followed with a hike of the same magnitude earlier Thursday.

UK inflation rises to 10.4% as food prices soar

“There had been hopes that inflation could have retreated from its double-digit heights, but the lurch upwards… is likely to refocus minds on the need to dampen down demand further and rein in the price spiral,” Susannah Streeter, head of money and markets at broker Hargreaves Lansdown, wrote in a note Thursday.

The Bank of England’s job is made more difficult by the fact that the UK economy is expected to shrink this year, because higher interest rates constrain consumer demand and business investment. Turmoil in the banking sector, which is expected to cause banks to further tighten lending criteria, could depress growth even further.

https://edition.cnn.com/2023/03/23/economy/uk-interest-rates-hike/index.html