“ Kill the beast » which inflation embodies: this is what the IMF requested from European banks at the end of April 2023 and this is what the Bank of England (BoE) tried to do by relentlessly tracking it. On May 11, 2023, the BoE delivered a new blow by raising its rates for the 12th consecutive time. The increase was 0.25 percentage points, which brought its key rate to 4.5%, a peak since 2008 and the start of the financial crisis.
Bank of England raises rates for the twelfth time to stem record inflation
A year and two days later, the British central bank announced that it would maintain its key rate at 5.25% on Thursday but said “ optimistic » on a decline in inflation in the coming months, which could pave the way for monetary easing.
“We have had encouraging news on the inflation front and believe that it will fall close to our target of 2% in the coming months,” commented the governor of the institution, Andrew Bailey, adding however we want to see “ more evidence » in this sense.
It’s hardly a surprise
This is hardly a surprise: as early as last September, the BoE had chosen to interrupt a cycle of 14 consecutive turns of the screw, leaving its key rate unchanged at 5.25%, its highest level since early 2008 and the crisis. economic and financial.
And for good reason: in the wake of this decision taken on August 3, 2023, the British pound maintained its losses against the dollar and the euro on Thursday. Around 1:30 p.m. Paris time, the currency lost 0.43% against the greenback, to 1.26 dollars per pound, and fell 0.37% against the single currency, bringing it to 1.16 euros per pound.
Bank of England raises rates by 0.25 points amid “persistent inflationary pressures”
Two members of the Bank of England’s Monetary Policy Committee (MPC) today voted for a quarter-point rate cut, compared to just one vote at the last meeting in March, on remains in favor of maintaining the key rate at 5.25%.
Slight decline in inflation in March
Economists did not expect a change in this May decision, and envisage that the institution will begin its cycle of monetary easing this summer, largely banking on the month of August. At 1:25 p.m. Paris time, the pound sterling accentuated its decline against the dollar shortly after the decision, losing 0.28% to 1.2463 dollars.
Last month, Mr. Andrew Bailey estimated that the figures for April, expected this month, “ should report a sharp fall » inflation towards the “target” of the monetary authority, namely 2%.
If inflation marked a slight decline in the United Kingdom in March, to 3.2% over one year, compared to 3.4% in February, wage growth reached 6% (excluding bonuses) for the three months ended. at the end of February, signaling a still tight labor market.
Growth has strengthened since the start of the year
Inflationary risks persist in particular because “ geopolitical risks have intensified following events in the Middle East, although this has so far had a limited impact on trade and oil prices », further notes the BoE.
The British central bank forecasts that inflation, “ increases slightly in the second half of the year, to around 2.5%”, and estimates returning to its objective more sustainably in 2026.
On the activity side, “ British GDP growth has strengthened since the start of the year », Specifies the BoE, reversing the trend of the second half of 2023, during which the United Kingdom fell into technical recession.
The weakest growth in the rich G7 countries
The British monetary institution estimates that GDP rose by 0.4% in the first quarter, and raised its growth forecasts to 0.5% for the whole of 2024 and 1% in 2025 in the United Kingdom . Official UK GDP figures for the first quarter of 2024 will be published on Friday.
The Organization for Economic Co-operation and Development (OECD), for its part, predicts that the United Kingdom will show the weakest growth of the rich G7 countries next year, precisely because, among other things, of interest rates still high and stubborn inflation.
(with AFP)
