(Kitco News) - As expected, the Bank of England continued to aggressively tighten its monetary policy raising the bank rate by 75 basis points to 3%.
Analysts note that this was the biggest rate hike since 1989 as the central bank continues to battle inflation at a 40-year high. Because of the growing inflation risk, the BoE signaled further tightening.
“The majority of the Committee judges that, should the economy evolve broadly in line with the latest Monetary Policy Report projections, further increases in Bank Rate may be required for a sustainable return of inflation to target, albeit to a peak lower than priced into financial markets,” the central bank said in its monetary policy statement.
“There are, however, considerable uncertainties around the outlook. The Committee continues to judge that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary,” the statement said.
Gold against the British pound is seeing some buying momentum in initial reaction to the rate hike. Spot gold against the pound last traded at £1,444.89 an ounce, up 0.65% on the day.
The BoE’s monetary policy tightening comes as it continues to see a very challenging outlook for the U.K. economy. The committee warned that its tightening path could lead to a two-year recession.
According to its economic projections, the BoE sees the economy contracting 1.5% in 2023 and seeing a further 1% decline in GDP in 2024.
