Bank of England raises interest rates to 1.25% to combat inflation

The Bank of England (BOE) is raising interest rates for the fifth time this year to tackle inflation rates which are reaching close to 11%.

A majority of the Monetary Policy Committee (MPC) have agreed to set interest rates at 1.25% in efforts to combat rising living costs, in the first time since 2009 interest rates have been above 1%.

The BOE has not ruled out further increases in the future, as it noted it will ‘take the actions necessary to return inflation to the 2% target.’

This news comes after figures from the Office for National Statistics earlier this week revealed that the UK’s economy is in reverse, with UK GDP dropping by 0.3%

Interest rates have risen across the pond too, with the US Federal Reserve announcing a 0.75% rise in interest yesterday, as the country grapples with the same cost of living pressures.

Members of the MPC said the drop in GDP was unexpected and reflected a decline in Track and Trace activity, leading the committee to predict a 0.3% fall in GDP, rather than the earlier predicted 0.1% rise.

Consumer confidence is also thought to have fallen, but some parts of household spending has remained consistent.

Former governor of the BOE, Lord Mervyn King, has said the current economy is ‘reminiscent of the 1970’s’ and urged Boris Johnson to be clear with the British public about the difficulties to come.

He wrote in the Spectator: ‘Our leaders need to give us a clear narrative explaining why recent events will inevitably lower our national standard of living, how that burden will be shared, why it is important to bring inflation down, and why measures to raise economic growth and reduce regional disparities will take many years to come to fruition but will work only if we make a start now.’

In relevant news, Mayor of London, Sadiq Khan, has warned that while violent crimes have been reducing in the capital since last year, this could increase again due to the cost of living crisis.

Photo by Christopher Bill