Borrowers could be facing higher rates of interest in the coming months , as Bank of England officials prepare to accelerate tightening monetary policies to counter stagnation fears.
Huw Pill Huw Pill, the bank’s chief economist said he would be willing to implement the “faster pace” of tightening than what the Bank has implemented in the last few months.
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The Bank has raised the interest rate by 0.25 percent which is 25 basis points, during the five previous meetings in December, the month which was when it began the process of tightening monetary policy. It will soon release instructions on how to reduce its assets next month, in part of its larger plans to end stimulus and slow the economy as well as stop the escalating rate of inflation.
Prices increased by 9.1 percent during the month of May, and inflation is expected to reach a peak of over 11 percent in October, as prices for energy go up in line with Bank forecasts.
The monetary policy committee of the Bank announced in its minutes of its meeting in the month of June that it was prepared to take action “forcefully” to tackle inflation in the event of a need.
Pill declared in a speech to an event for central banks hosted by King’s Business School in London today.
A increase of 0.5 percentage points is unheard of in the history of 25 years of this committee. Michael Saunders, Catherine Mann and Jonathan Haskel voted to raise rates by a large margin at the last meeting but they were defeated by the majority of members, including Pill who chose to go with a less drastic increase. Pill hasn’t voted for the 0.5-point increase in his two years as a member of the committee.
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The Federal Reserve raised rates by an amount of 0.75 percent last month in the very first time since as well as The European Central Bank has indicated that it is willing to consider an 0.5-percentage point increase in September.
Pill an ex- Goldman Sachs economist, said the Bank was required to weigh the threat of a longer-term economic slowdown against the risk that could result from “uncomfortably high” inflation, that could be ingrained into the expectation of businesses as well as people in general.
Pill reiterated the sentiments that was expressed in the words of Jon Cunliffe, the Bank’s deputy governor for financial stability, and a fellow member of the committee who had earlier on that session that Bank will take on “whatever is necessary” to fight inflation.
He said on Today on Radio 4 that the recession the economy is experiencing “very different” from the financial crisis of 2007-2008, that “was followed by a very deep and very long recession”.
Cunliffe was a vote for the 0.25-point rate increase in the month prior, and was the only member of the committee to support holding interest rates rather than increase them during the month that followed the Russian invasion of Ukraine affected markets around the world.
The Bank anticipates that the economy will be steady over the coming year, he stated and added: “That’s a very different view from what that we saw from 2009 to the end of 2011. It’s a picture that shows an economy in decline, where consumers aren’t able to spend and have to cut spending due to the squeeze on living costs.”
