The Bank of England and the unprecedented increase in interest rates- what next?
The Bank of England and the unprecedented increase in interest rates- what next? “With a good perspective on history, we can better understand the past and present, and thus a clear vision of the future" — Carlos Slim Helu. The Bank of England increased UK’s most significant interest rate (Bank Rate) from 0.75% to 1% in May 2022; they believe that doing this will help decrease the speed at which inflation is soaring. But this it is not a quick fix, as it will take time to see results. The current official bank rate continues to be 1% as of June 2022. They are also anticipating that the inflation rate will increase to 8% during the spring. However, rising interest rates now will ensure that inflation rate decreases back down in the next few years towards their 2% target given by the Government. The BoE has numerous responsibilities within the financial sector, including ensuring the smooth running of central banks, building societies, credit unions, insurers, and investment firms in the UK through their Prudential Regulation Authority, which regulates and oversees their operations. They are also responsible for maintaining prices low and stable by retaining the 2% inflation target given by the Government, as low and stable inflation is beneficial to the economy. The BoE has increased interest rates three times since December 2021; no other central bank has raised its interest rates as much as the BoE has in recent months. The increases in interest rates in May’22