Bank of England raises key interest rate to combat inflation

The Bank of England raised its key interest rate Thursday for the third time since December as it pushes ahead faster than other central banks in combating a global wave of inflation fueled by soaring energy prices

The bank boosted its key rate to 0.75% after Russia’s war in Ukraine pushed oil prices to a 13-year high earlier this month. It comes a day after U.S. Federal Reserve raised its benchmark short-term rate to 0.25% to tame the worst inflation since the early 1980s. The Fed had left it at close to zero since the coronavirus pandemic struck two years ago.

The European Central Bank left its rates unchanged last week but announced an early exit from its economic stimulus efforts in a bid to combat record inflation in the 19 countries that use the euro.

The Bank of England, which voted 8-1 in favor of the increase, said the war in Ukraine is “likely to accentuate both the peak in inflation and the adverse impact on activity by intensifying the squeeze household incomes.”

It began raising rates in December amid concern about rising consumer prices as the world began to emerge from the pandemic, increasing demand for energy and raw materials needed by industry.

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Even before Russia’s invasion of Ukraine, the Bank of England expected consumer price inflation to peak at around 7.25% in April, more than three times its target of 2%.

The Resolution Foundation, a think tank focused on helping low-income families, said last week that inflation may now peak at more than 8.4%, which would push inflation to its highest level since 1982.

Central banks in other countries may soon catch up to the Bank of England. The Federal Reserve signaled that it may raise rates six more times this year.

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