The Bank of England (BoE) announced Thursday that it would raise benchmark interest rates again to counteract skyrocketing inflation.
The rate hike followed the U.S. Federal Reserve’s increase of 0.75% the day before.
Some economists incorrectly speculated that the BoE would raise rates as high as the Fed did, according to Sky News. Still, the BoE’s Monetary Policy Committee (MPC) decided on an increase of 0.25%, its fifth interest rate hike in as many policy meetings.
All nine members of the MPC were in favor of an increase, but only six voted in favor of 0.25%. The other three voted against it because they preferred a steeper increase of half a percent.
The new interest rate currently stands at 1.25%, with the BoE clocking inflation at 9%, 7% over the government’s target level. It estimates inflation will reach as high as 11% in the UK by the beginning of the fall.
Additionally, the BoE noted that Britain’s economy will likely have shrunk by 0.3% by the end of the second quarter, raising the specter of recession, per The Epoch Times.
The MPC suggested a more aggressive rate hike may be in the cards, declaring in its minutes, “The committee will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response,” reported Sky News.
In the wake of the rate hike, the British pound decreased in value against the U.S. dollar, falling to roughly $1.22 as of Monday, June 20.
The pound has been on a steady decline against the dollar in recent months. Coupled with reduced GDP and runaway inflation, the weakening pound has signaled to some economists that Britain is already in a recession, according to Business Insider.
The next meeting of the MPC is scheduled for August 4.