Bank of England hikes interest rates to 5.25%

Aug 4, 2023

Trapped between high inflation and an economy on the brink of recession, the Bank of England (BoE) has once again increased the UK interest rate, taking the figure to 5.25%.

The Bank's Monetary Policy Committee (MPC) voted on the 0.25% increase with a vote split. Two members preferred to increase the bank rate by 0.5% to 5.5% to "lean more actively" against inflation persistence.

Meanwhile, one member voted to maintain the bank rate at 5%, arguing that there was no longer a strong case for tightening monetary policy futher.

The announcement follows some relative relief to the UK economy, with annual inflation dropping from 8.7% in May to 7.9% in June. While inflation is still a far cry from the BoE's 2% target, the recent easing of inflation pressure will likely be seen as justification for the BoE's aggressive increases in the bank rate.

Commenting on the MPC's decision, Chancellor Jeremy Hunt said:


"If we stick to the plan, the Bank forecasts inflation will be below 3% in a year's time without the economy falling into a recession. But that doesn't mean it's easy for families facing higher mortgage bills, so we will continue to do what we can to help households."

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