British central bank raises key interest rate to combat inflation
Bank of England raises key interest rate to curb inflation - impact on UK stock market and economy.

The Bank of England (BoE) is continuing its fight against high inflation and has raised the key interest rate by a quarter of a point to 4.50 percent. This rate hike marks the twelfth since the end of 2021. At 10.1 percent, the inflation rate in the UK is at the highest level in Western Europe and is the only country in the region with double-digit inflation.
Central bankers expect inflation to remain at a high level for longer than expected. In particular, the continuing increases in food prices are contributing to this situation. The BoE has therefore revised its inflation forecast and now assumes that consumer prices will not reach the 2 percent target until early 2025, instead of within a year as previously assumed.
Another factor contributing to high inflation is the heavy reliance on imported natural gas for energy, the price of which has been rising due to the Ukraine war. This statistical effect is expected to play a less significant role in the coming months.
Central bankers are concerned about the possible buildup of increased wage pressure due to the recent wage rounds. Sustained inflation could be the result. Some members of the BoE's Monetary Policy Committee voted against the rate hike, while experts at U.S. investment bank Goldman Sachs forecast that rates could rise as high as 5.0 percent by August.
It remains to be seen whether the BoE will take further steps to get inflation under control. Recent rate hikes by the U.S. Federal Reserve (Fed) and the European Central Bank (ECB) point to a global trend. While Fed Chairman Jerome Powell held out the prospect of a possible pause, ECB President Christine Lagarde said it was too early to think about such a pause.
Central banks' decisions reflect the challenges they face in the face of persistent inflation. It remains to be seen how the economy and inflation will develop further and what influence this will have on the Bank of England's monetary policy measures.
