The Bank of England MPC (Monetary Policy Committee) has voted 6-3 in favour of increasing the Bank rate by an additional 0.5% taking the rate up to another high of 3.5%.
The current rate is the highest it has been since 2008.
Of the 3 that voted against the increase, 2 wanted the rate to remain at its previous level of 3%, whereas the other wanted to increase rates by a further 0.25%.
Prices are set to continue to rise
It is thought that the UK’s inflation rate would continue to rise into 2023 before taking a sharp fall in mid-2023 to somewhere way below the 2% target in the next 2 -3 years. Essentially the UK is bracing itself for quite a long and drawn-out recession.
During the most recent Autumn Statement where it was announced that the extension of the Energy Price Guarantee will cap household unit energy prices leading to a reduction in the MPC’S forecast for inflation in Q2 2023.
During the minutes that were taken during the meeting the MPC said:
The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response.
