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Bank Of England · Inflation · Interest Rates · UK Economy
The Bank of England's Monetary Policy Committee (MPC) increased the Bank Rate by 0.25 percentage points to 4.25% on March 22, 2023, with a 7-2 majority vote, citing unexpectedly high February CPI inflation of 10.4% and a tight labor market as primary drivers for the decision.
Global growth is stronger than projected, with core consumer price inflation remaining elevated in advanced economies, despite material falls in wholesale gas and oil prices. Significant volatility in global financial markets followed the failure of Silicon Valley Bank and UBS's acquisition of Credit Suisse, though the Bank of England's Financial Policy Committee (FPC) assessed the UK banking system as resilient.
Additional fiscal support from the Spring Budget is estimated by Bank staff to increase UK GDP by approximately 0.3% over coming years, and the Government's Energy Price Guarantee (EPG) extension means real household disposable income will remain broadly flat. CPI inflation is still expected to fall sharply in Q2 2023, largely due to the Budget and lower wholesale energy prices, but the MPC will continue to monitor persistent inflationary pressures, including labor market conditions, wage growth, and services inflation, indicating further tightening would be required if pressures persist.
