The Bank of England raised the rate to 4%

At its first meeting this year, the Bank of England raised its benchmark interest rate by 50 basis points – from 3.5% to 4% per annum, as expected by most analysts. The rate was raised following the results of the tenth meeting in a row and reached its maximum value since 2008.

This decision was made almost unanimously: seven out of nine members of the Monetary Policy Committee (MPC) voted in favor. And only two MPC members voted to keep the rate at 3.5% per annum.

The meeting participants noted that a further rate increase is possible, but only in the case of more stable inflation. The regulator also suggested that inflation in the country has already passed its peak level. This may serve as a signal that the next rate increases will be carried out in increments of no more than 25 bp.

In December, consumer prices in Britain rose by 10.5% year-on-year. Thus, inflation slowed down from 10.7% in November. 

The Bank of England also presented updated macroeconomic forecasts. In particular, the regulator expects that UK GDP grew by 0.1% in the fourth quarter (previously expected to decline by 0.3%). At the same time, in the first quarter of 2023, the regulator expects a decrease in GDP by 0.1%. According to the results of the entire 2023, the central bank predicts a 0.5% reduction in UK GDP. In 2024, GDP is expected to decline by 0.25%.

After the announcement of the Bank of England's decision, the pound against the dollar fell by 0.7% to $1.2240 per pound. The FTSE 100 stock index rose 0.55%.