Yesterday, 16th December 2021, the Bank of England raised inflation prices by 0.25%, ending a 20-month running streak of a historically low 0.1% rate. The Bank of England’s Monetary Policy Committee (MPC), which sets interest rates, voted 8-1 to increase the rate by 15 basis points to 0.25%.
Rising inflation generally refers to the notion of increases in prices and the fall in the purchasing value of money, ultimately meaning that the public would be subjected to being able to buy less for the same amount of money. For businesses, this can mean company credit cards and existing loans have higher interest payments, less disposable income, and bigger overheads.
The increase to 0.25% from 0.1% came despite fears that the Omicron variant of Covid could slow the UK economy by causing people to spend less. And whilst last year the rate was reduced down to 0.1% in March 2020 in response to the coronavirus pandemic, concerns about the impact over the soaring inflation outweighed the worries surrounding the newest variant Omnicron.
The Bank of England has said that raising rates was necessary to ensure that consumer price inflation – which is currently at 4.2%, returns to its regular 2% target in the next couple of years, with the Office for National Statistics citing petrol, used cars, food, and household goods as key factors driving the rate.rs.
The central bank initially held off from a widely expected rate rise last month due to concern about the impact of the end of the government’s job furlough programme however, with the UK inflation hitting a 10-year high, jumping to 5.1% in November the Bank of England was forced to then consider rising inflation rates.
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