Bank of England

Bank of England raises interest rate to 3.5% for the ninth time in a year:

Most MPC rate makers support a 0.5 percentage point hike despite fears that the UK is heading into a prolonged recession.

The Bank of England raised interest rates by half a percentage point to 3.5% to combat double-digit inflation that has fueled a widespread cost-of-living crisis.

Members of the central bank's Monetary Policy Committee (MPC) voted to raise borrowing costs after the consumer price index recorded 10.7% year-over-year inflation in November.

Most of the central bank's rate-setting committee members said a ninth-rate hike in the past year was needed to bring inflation down to the target of 2 percent by 2025.

The move has raised UK interest rates to their highest level since October 2008 and goes against expectations that the UK is heading into a prolonged recession. However, he noted that rate hikes have been slowing since the MPC raised its borrowing costs by 0.75 percentage points at its meeting in November.

Headline inflation in the UK eased to 10.7% in November from 11.11% the previous month, but that drop wasn't enough to convince the bank to support smaller hikes and food and energy price gains remained strong.

Financial markets were expecting a rise after Governor Andrew Bailey and chief economist Hugh Pill said "more needs to be done" to curb inflation. Still, a repeat of November's 0.75 percentage point rise is unlikely.

In a three-way split vote in which two of the nine-member MPC voted to keep the benchmark rate and another pushed for a more aggressive hike, the MPC said there was "significant uncertainty about the outlook."

Prices for many commodities and commodities have declined after soaring earlier this year as lockdowns on global supply chains have eased, but price pressures remain in all global markets.

As cold winter weather engulfs much of Europe, the trajectory of gasoline and food prices may rise, leading to higher inflation for a longer period. The U.S.

Federal Reserve (Fed) and European Central Bank (ECB) have sent a signal that they will ease interest rate hikes in 2023, as the prospect of a recession and job losses in developed countries is high.

Russia's invasion of Ukraine continues to disrupt gas and some food supplies while mounting inflationary pressures.

According to the bank's report, there are several indicators that the economy has weakened since the summer. GDP is expected to contract by 0.1% in the fourth quarter of 2022, and officially the UK economy will enter a recession after contracting 0.2% in the third quarter. The downward trend is expected to continue through 2023.

The number of home purchases fell below 60,000 per month, the lowest level since 2013, suggesting that the housing market is weakening.

Bank officials rely on local agents to ensure the health of the business sector. Business investment has declined in recent months, according to the bank's proxy reports, and confidence surveys of industry leaders show that they remain cautious "although references to uncertainties in proxy reports have declined somewhat in recent weeks."

London Stock Exchange professors Swati Dhingra and Silvana Tenreiro, two members of the MPC, said the economy would slow without further rate hikes due to the cost-of-living crisis facing millions of households and rising interest rates that are already driving up mortgage costs.

In comments delivered by officials in the bank's accompanying report, they said:

"The current [default] rate setting is sufficient to bring inflation back to target levels over the medium term."

Katherine Mann, former chief economist at US bank Citi, "reportedly believes a 0.75 percentage point increase is needed to tighten the tightening cycle.”. She was in the minority. As a result of examining the calculation of wages in the private sector, it was found to be maintained at the 4% level.

According to official data, revenue increased by about 6%, which was driven by strong wage growth in the financial and business services sector.