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Feb 3, 2023

Bank of England raises interest rates to 4%

The Bank of England (BoE) has raised interest rates by 0.5% to 4% following a monetary policy committee (MPC) meeting on Thursday (2 February).

This is the tenth consecutive time the Bank has increased interest rates, resulting in the highest base rate in 14 years.

The MPC voted by a majority of 7-2 to increase the bank rate. According to the BoE, this decision will help meet the 2% inflation target in a way that "sustains growth and employment" in the medium term.

High energy prices and a tight labour market continue to affect inflation. However, the Bank suggests it is likely to have peaked in the UK and that the recession may be shorter and less severe than feared.

There is likely to be a further increase in interest rates later this year, with the Bank planning to raise the base rate to 4.5% before the summer.

Commenting on the decision, the BoE said:

"The MPC will continue to monitor indications of persistent inflationary pressures, including the tightness of labour market conditions and the behaviour of wage growth and services inflation.

"If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required."

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