Bank of England deploys biggest interest rate rise in 27 years

The Bank of England (BoE) imposed the biggest raise in interest rates since 1995 on Thursday, despite warning that a long recession is on its way, as it rushed to smother a rise in inflation which is now set to top 13 pct.

Reeling from a surge in energy prices partially caused by Russia's invasion of Ukraine, the BoE's Monetary Policy Committee voted 8-1 for a half percentage point rise in Bank Rate to 1.75 pct - its highest level since late 2008 - from 1.25 pct.

Governor Andrew Bailey said all options were on the table for the BoE's next meeting in September, and beyond.

“Returning inflation to the 2 pct target remains our absolute priority. There are no ifs and buts about that,” Mr Bailey said at a news conference.

The BoE warned that Britain was facing a recession with a peak-to-trough fall in output of 2.1 pct, similar to a slump in the 1990s but far less than the hit from COVID-19 and the downturn caused by the 2008-09 global financial crisis.

The economy would begin to shrink in the final quarter of 2022 and contract throughout all of 2023, making it the longest recession since after the global financial crisis.

The British central bank has now raised rates six times since December but Thursday's move was the biggest since 1995.

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