The Bank of England has warned inflation could hit 8% as early as next month in Britain as it raised interest rates to pre-pandemic levels on Thursday.
The UK’s central bank raised interest rates to 0.75%, marking the first time interest rates have hit such highs since the start of the Chinese coroanvirus pandemic.
In an eight-to-one vote, only Deputy Governor Sir Jon Cunliffe called for rates to remain at 0.5%, citing concerns over the growing cost of living crisis facing Britons means and the fact that a rate hike would have a negative impact on growth, The temperature reported.
The move is seen as an attempt to rein in skyrocketing inflation rates, which have risen over the past year following huge government spending to keep the economy afloat during lockdowns imposed by the government. government.
Inflation was further exacerbated by the Russian invasion of Ukraine which further destabilized European food and fire markets.
Central bank boss to UK workers: Help fight inflation by not taking pay riseshttps://t.co/LW6rbL4kwd
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While previous estimates had predicted inflation would hit 8% in the fall, the Bank of England said on Thursday it could hit that level as early as next month.
Central bankers then warned that inflation could rise by “several percentage points” by October, when households receive their energy bills for the first half of the year. The energy price cap – set by regulator Ofgem – is already set to rise by 54% in April, but will likely rise even more when it is set again in the autumn.
Officials also admitted there was little they could do to prevent further shocks to the economy if the war in Ukraine continued, noting that with the UK a net importer of energy, “monetary policy is unable to prevent” further price increases.
“Global inflationary pressures will further strengthen significantly over the coming months, while growth in economies that are net energy importers, including the UK, is expected to slow,” the bankers said.
Inflation Nation: UK sees biggest drop in wages since 2014https://t.co/esXxXuraBu
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This week the Trades Union Congress (TUC) said energy bills are expected to rise at least 14 times faster than wages this year.
The government’s statistics agency, the Office for National Statistics (ONS), also revealed this week that the 3.8% pay rises had effectively been wiped out by inflation, with the average take-home pay – excluding bonuses – having actually fell by 1% in real terms, the biggest drop since 2014.
Despite this, the government has refused to lift taxes on electricity bills, 30% of which are returned to the government as taxes or directed to subsidies for so-called green energy companies.
The government has also so far refused to cut taxes – despite campaigning on tax cuts in its 2019 election manifesto – in other areas, such as the planned hike in National Insurance payments, which, according to the government, is needed to pay arrears to the nation’s socialized healthcare system incurred during the Chinese coronavirus crisis.
Prime Minister Boris Johnson, who despite Conservative leadership has been at the forefront of the Build Back Better movement to move the UK economy to a net zero carbon producer by 2050, tried, and apparently failed, to get more oil from Saudi Arabia this week, while still refusing to open natural gas production to the domestic market.
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