UK policymakers led by governor Andrew Bailey voted 7-2 to raise the benchmark lending rate to 4 per cent, the highest since 2008.
| The Bank of England signalled the fastest pace of interest-rate hikes in three decades may be drawing to a close after it raised its benchmark lending rate a half point.
The BoE has underestimated inflation in the past and will not claim the battle is won until prices are falling in line with its outlook. Bailey said the bank needs pay and services inflation, which has hit a 30-year high of 6.8 per cent, to ease, and he added that the risks are skewed more strongly to the upside than at any time on record.“It is clear that the central bank feels it is coming to the end of its hiking cycle,” said Jamie Niven, a fund manager at Candriam.
Bailey pointed out that the bank’s projections were inherently uncertain, subject to volatile energy and commodity markets, and that it has previously underestimated pay growth. For Silvana Tenreyro and Swati Dhingra, impact of past increases and slowing growth would be enough to rein in inflation. They voted to leave rates unchanged. Catherine Mann, who voted for a 0.75 per cent increase last time, joined Bailey and the majority of MPC members in endorsing the half-point hike.
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