BoE Pill Sees Little Or No Growth in Coming Year

    The BoE is widely expected to tighten monetary policy this year, but it hasn’t made an official announcement yet. The central bank is facing a difficult balance between risking a longer-term slowdown and the dangers of “uncomfortable” high inflation, which could become entrenched in public expectations and company price-setting. Britain imports more energy than the U.S. Federal Reserve, and rising energy costs can hurt living standards.

    The Bank of England is widely expected to raise interest rates in August, the fifth time since independence. The chief economist has voted in favor of raising interest rates by 0.25 percentage points, and has said he will vote for more if necessary. The central bank has a very good track record when it comes to raising rates, but has been wary of choking off growth while battling inflation.

    As the cost of living rises, central banks are responding by pushing up interest rates, hurting those with debt. Meanwhile, workers are frustrated with rising costs, and wage stagnation has led to strikes in some countries. Worse, mounting concerns about economic growth are leading to talk of stagflation. With inflation threatening to undermine the global economy, the central bank has stepped up its policy in hopes of stimulating the economy.

    The Bank of England has warned that a slowdown in growth is not a good sign. Inflation has increased to unprecedented levels and it may be necessary to hike interest rates more rapidly to curb it. The inflation rate is expected to reach 4.5% by July 5 2022, but the central bank is likely to opt for 50 basis points of hikes instead of just a 25 basis point hike. Thereafter, the BoE will probably move back to 25 basis points and let inflation run its course.


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