Bank of England makes biggest interest rate hike in 33 years to cool rampant inflation

Tags: Economy/Finance International News

The central bank of the United Kingdom, Bank of England (BoE) raised its interest rates by the most since 1989 on 3 November 2022. It joins the US Federal Reserve and other central banks worldwide in rapid hikes as it tries to beat back high inflation fuelled by the conflict between Russia and Ukraine.

The BoE increased the Bank Rate to 3% from 2.25% and warned that the British economy might not grow for another two years.

The BoE Governor Andrew Bailey said that  “High energy, food and other bills are hitting people hard. Households have less to spend on other things. This has meant that the size of the UK economy has started to fall,”

The BoE said it now expects inflation will hit a 40-year high of around 11% during the current quarter, more than five times its 2% target. But it also thinks the economy has entered a recession.

When there is a negative growth in the economy for the two consecutive quarters then the economy is in recession.

Problem of Gas in Europe 

Europe has been particularly hard hit by a jump in natural gas prices as Russia responded to Western sanctions and support for Ukraine by curtailing shipments of the fuel used to heat homes, generate electricity and power industry and European nations competed for alternative supplies on global markets.

Important Central Banks in the world 

European Central Bank (ECB)

It is the Central Bank of the 19 European Union countries which have adopted Euro as their common currency.

Member countries of Eurozone: Belgium, Germany, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland, Slovenia , Cyprus, Malta,  Slovakia, Estonia , Latvia, Lithuania.