In an announcement on Thursday, 11 May 2023, the Bank of England's Governor, Andrew Bailey, detailed a 0.25 percentage point increase in the Bank Rate, bringing it up to 4.5%. This move comes in response to high inflation rates, which continue to exceed the Bank's 2% target, despite promising economic indicators.
Bailey commented on the current economic situation, stating, "The outlook for growth and unemployment has improved." Six months ago, the Bank had anticipated a long, shallow recession, but recent economic resilience has led to a revised forecast predicting moderate, positive growth.
Inflation continues to pose a challenge, with Bailey noting that it "remains too high." He further stated, "It is our job to get it all the way down to the 2% target and have it stay there," underscoring the Bank's commitment to reining in inflation.
Despite an annual consumer price inflation rate of 10.1%, down from a peak of 11.1% last October, the Bank expects inflation to fall sharply in the coming months, largely due to decreasing energy prices. However, the Bank also acknowledges the challenges posed by high food inflation, which currently stands at 19.1%.
In light of these conditions, Bailey asserted that the decision to increase the Bank Rate was to "address the risk of more persistent strength in domestic price and wage setting." He further emphasized the Bank's commitment to closely monitor inflationary pressures and adjust the Bank Rate as necessary, hinting that more significant measures may be on the horizon if inflationary pressures persist.
