The Bank of England raised its key interest rate to its highest level since the 2008 financial crisis on Thursday, stating that while inflation remained persistently high, the economy would now avoid recession this year.
The Bank of England raised interest rates by a quarter point to 4.5 percent, the 12th increase in a row, as UK annual inflation remained above 10%, fueling a cost-of-living crisis across the country.
Global policymakers are grappling with high inflation, which is largely the result of runaway energy prices following Russia’s invasion of Ukraine last year.
Following a monthly policy meeting, the Bank of England cautioned of “considerable uncertainties” regarding when UK inflation will return to its two-percentage-point target, as rising food prices offset sharp declines in energy costs.
At the same time, the Bank of England raised its prediction for British GDP by a record amount, noting that recent instability in the commercial banking sector will have only a minor impact.
“Six months ago, we were expecting a shallow but long recession,” BoE governor Andrew Bailey told a press conference.
“Since then, energy prices have fallen substantially and economic activity is holding up much better than expected.”
