England Hikes Interest Rate in Surprise Move

Source: Bank of England

The Bank of England (BOE) on Thursday decided to hike key interest rates, citing the underlying inflation pressures amid concerns of the Omicron COVID-19 variant.

• The Monetary Policy Committee chose to increase the Bank Rate to 0.25% from 0.1%, with the only dissent coming from external member Silvana Tenreyro.
• The move came as a surprise, making the BOE the first major central bank to hike rates since the COVID-19 pandemic.
• Governor Andrew Bailey warned that the Omicron variant already had an impact on retailers and restaurants and flagged inflationary concerns.
• Bailey said that it is still unclear whether the new variant would temper or add inflation pressure, which he said was a “very important” factor.
• The BOE expects the unemployment rate to decline to around 4% before the year closes, lower than the 4.5% it projected in November.