• Wednesday, February 28, 2024

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Bank of England chief concerned about ‘persistent’ high inflation

At its most recent regular monetary policy meeting a week ago, the Bank of England hiked its interest rate for a tenth time in a row as global authorities race to combat sky-high inflation.

Governor of the Bank of England Andrew Bailey (Photo by Frank Augstein / POOL / AFP) (Photo by FRANK AUGSTEIN/POOL/AFP via Getty Images)

By: Mohnish Singh

Bank of England governor Andrew Bailey on Thursday expressed concern over persistent high inflation even if the rate of price increases shows signs of cooling.

The remarks to a cross-party committee of MPs boosted the pound on raised expectations of more hikes to British interest rates, analysts said.

Bailey spoke on the eve of data Friday that could show Britain officially in recession should it be confirmed that the economy contracted in the final quarter of last year.

“We are concerned about persistence (of high inflation). This is why we (again) raised interest rates,” Bailey told the Treasury Committee.

At its most recent regular monetary policy meeting a week ago, the Bank of England hiked its interest rate for a tenth time in a row as global authorities race to combat sky-high inflation.

The BoE lifted UK borrowing costs by a half-point to four percent, the highest level since late 2008, or height of the global financial crisis.

UK inflation slowed to 10.5 percent in December — still around 40-year highs and more than five times the BoE’s official target-level of two percent.

Central banks the world over are seeking to cool high energy and food prices, fuelled by Russia’s invasion of Ukraine one year ago, by hiking interest rates.

Sweden’s central bank on Thursday announced a half-point rate increase to three percent, the highest level since 2008.

And “the next (BoE) move is still likely to be another hike as we look to tomorrow’s fourth-quarter GDP numbers, where we’ll find out if the UK economy entered a technical recession”, noted Michael Hewson, chief market analyst at CMC Markets UK.

Britain’s economy shrank 0.3 percent in the third quarter of last year. Anther contraction would mean the UK is in a technical recession, or two quarters of negative growth in a row.

However, recent data suggests Britain may have done enough since then to dodge recession, at least for now.

The consensus forecast is that the country recorded flat growth in the final three months of 2022.

Still, the BoE last week predicted that the UK economy would shrink in every quarter this year.

(AFP)

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