Bank of England interest rates raised to 3.5 per cent reaching 14-year high
15 December 2022, 12:03 | Updated: 15 December 2022, 13:21
Bank of England interest rates have been raised to 3.5 per cent, reaching a 14-year high.
Listen to this article
Loading audio...
The decision by the Bank of England's monetary policy committee (MPC) saw the rates increased by 0.5 percentage points.
Six members of the nine-strong MPC voted to raise its interest base rate from 3% to 3.5%.
It is a slowdown from the last rise in November when rates were increased by 0.75 percentage points, and in line with what economists had forecast.
Rates have been raised in every meeting since late last year as the Bank tries to get inflation under control.
"The majority of the committee judged that, should the economy evolve broadly in line with the November Monetary Policy Report projections, further increases in Bank rate might be required for a sustainable return of inflation to target," the Bank said.
However, two members of the committee - Swati Dhingra and Silvana Tenreyro - voted in favour of holding rates at 3%.
Another member, Catherine Mann, called for a firmer 0.75 percentage point increase, at the meeting held on Wednesday.
The Bank of England has said it now expects UK GDP to decline by 0.1% in the final quarter of 2022, which is 0.2 percentage points stronger than expected in last month's report but would still show the UK entering a technical recession.
It added that household consumption has remained "weak" and it has seen the housing market "continue to soften".
The pound dropped by as much as 1% against the dollar after the announcement at noon.
It bounced back slightly but remains 0.78% lower at 1.232 against the US dollar, and 0.2% lower against the euro at 1.160.
In response to the ninth consecutive increase, Chancellor Jeremy Hunt said: "High inflation, exacerbated by Putin's war in Ukraine, continues to plague countries across the world, eating into people's pay cheques and driving up food and energy prices.
"I know this is tough for people right now, but it is vital that we stick to our plan, working in lockstep with the Bank of England as they take action to return inflation to target.
"The sooner we grip inflation the better. Any action which risks permanently embedding high prices into our economy will only prolong the pain for everyone, stunting any prospect of economic recovery."
Labour's shadow chancellor Rachel Reeves said: "Today's rate hike is further evidence that the Government have lost control of the economy, harming growth, and leaving millions of working people paying a Tory mortgage penalty for years to come.
"After 12 years of Tory failure and wasted opportunities, only Labour offers the leadership and plans to stabilise our economy and to get it growing, so we aren't just surviving, but thriving again."
