The Bank of England hikes it key policy rate for the third time on Thursday, with the ongoing conflict between Russia and Ukraine expected to impact global supply chains further.
Source: Bank of England
EWU is down 0.46% premarket.
The Monetary Policy Committee recorded a majority vote 8-1 to increase the Bank Rate by 0.25 percentage points to 0.75% from 0.5%, noting that additional increases could be needed in the coming months.
Inflation is expected to peak at 7.25% in April, with upward pressures seen to ease over time subject to the increasing market-implied path. The print is projected to slow down to above 2% in two years’ time and below the 2% target in three years.
The Bank of England noted that the Russian invasion of Ukraine has driven hikes in energy and prices of other commodities such as food and is likely to impact the worsen the ongoing constraints on the global supply.
The bank also said household incomes are expected to be squeezed even more by the higher prices of energy, but this is something that monetary policy “is unable to prevent” as its main goal is aligning economic growth with inflation.
The latest increase marks the third policy rate hike, making it the Bank of England’s most aggressive move.