United Kingdom Defies Market’s Euphoria

Business Banking Insight

Here’s the British Central Bank’s interest rate decision – Critics warn that the conducted policy may harm the economy.

United Kingdom Defies Market's Euphoria

For the third time in a row, the Bank of England leaves its key interest rate unchanged at 5.25 percent, reports CNBC.

Thus, the country continues its restrictive monetary policy aimed at keeping British inflation in check.

Despite the tight policy of the past year, with a series of interest rate hikes since December 2021, high inflationary pressure persists.

Disappointing Wage Growth

In October, inflation in the country fell to 4.6 percent, the lowest level in two years. It was also unusually rapid.

However, wage growth was below expectations.

If inflationary pressure continues, further tightening may be necessary, according to the country’s Monetary Policy Committee.

Minimal Growth

Thus, the Bank of England goes against market expectations. Right now, it is experiencing somewhat of a euphoria following the positive news from the US Federal Reserve on Wednesday.

Critics warn that the central bank’s restrictive monetary policy risks keeping interest rates high for too long, potentially damaging an already fragile British economy.

Growth is expected to be a mere 0.1 percent in the fourth quarter – however, an improvement after the third quarter’s zero growth.