By Karim Hammam
The Bank of England has raised its base interest rate to 4% from 3.75%, marking the first increase in more than three years. The Monetary Policy Committee voted unanimously for the hike, though one member, Catherine Mann, favored a larger 0.5 percentage-point rise.
Inflation pressures from Middle East conflict
The committee said the move was needed to control rising inflation driven by higher global energy and fuel prices resulting from the ongoing conflict between the US, Israel and Iran. Governor Andrew Bailey said there is now enough inflationary pressure in the pipeline from the rise in energy prices to warrant the increase.
Further hikes likely unless conflict resolved
Bailey cautioned that today’s increase should not be seen as the start of an inevitable long sequence of hikes, but added that unless the Middle East conflict is resolved, it is unlikely to be the last increase. The MPC warned that companies’ ability to absorb higher energy costs is temporary and that persistent energy shocks would eventually push up consumer prices for goods such as food and drink.
