Saudi Press

Saudi Arabia and the world
Sunday, Jul 13, 2025

Bank of England raises interest rates to 0.75% as inflation soars

Bank of England raises interest rates to 0.75% as inflation soars

Threadneedle Street reacts to prospect of Ukraine war pushing UK inflation peak to 10%

The Bank of England has responded to the likelihood that the war in Ukraine will push inflation to around 10% this year by raising interest rates back to the pre-pandemic level of 0.75%.

Threadneedle Street’s monetary policy committee (MPC) voted 8-1 to increase borrowing costs by 0.25 percentage points – the first time the Bank has raised rates at three successive meetings in more than two decades.

The Bank said Russia’s invasion had forced it to rethink its forecast for the peak of inflation this year and it was now expected to be “several percentage points” higher than the 7.25% it had previously forecast.

There had been speculation before the meeting that some MPC members might opt for a half-point increase, but only one – Jon Cunliffe – dissented from the majority by voting to keep interest rates on hold.

The other eight MPC members decided fresh action was needed to return inflation – currently at a three-decade high of 5.5% – to the government’s 2% target. They stressed the tightness of the labour market and upward pressures on costs and prices.

Minutes of the meeting are likely to stoke fears that the economy is heading for a period of stagflation – weak growth and strong upward price pressures.

“Developments since the February report are likely to accentuate both the peak in inflation and the adverse impact on activity by intensifying the squeeze on household incomes,” the Bank said.

“Global inflationary pressures will strengthen considerably further over coming months, while growth in economies that are net energy importers, including the UK, is likely to slow.”

The Bank said growth in January had been stronger than expected but consumer confidence was being hit by falling living standards. “That impact on real aggregate income is now likely to be materially larger than implied in the February report, consistent with a weaker outlook for growth and employment, all else equal.”

Despite strong inflationary pressure, the Bank adopted a less aggressive tone about future rate increases than the US Federal Reserve, which is pencilling in a further six increases in borrowing costs this year. The MPC said a further “modest” tightening of policy could be needed over the coming months, depending on the medium-term outlook for inflation.

The Bank thinks the annual inflation rate will rise to around 8% in the second quarter of 2022, and perhaps even higher later this year.

There was a risk that, if sustained, rising energy prices would lead the UK energy regulator Ofgem to push its price cap “substantially” higher in October.

“This could temporarily push inflation around the end of this year above the level projected in April, which was previously expected to be the peak. Further out, inflation is expected to fall back materially, as energy prices stop rising and as the squeeze on real incomes and demand puts significant downward pressure on domestically generated inflation.”

The Bank said it could do nothing to prevent higher prices for energy and other commodities hitting living standards.

“The economy has recently been subject to a succession of very large shocks. Russia’s invasion of Ukraine is another such shock,” it said.

The Bank raised rates for the first time in December, from 0.1% to 0.25% and increased them further – to 0.5% in February.

Newsletter

Related Articles

Saudi Press
0:00
0:00
Close
Kurdistan Workers Party Takes Symbolic Step Towards Peace in Northern Iraq
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Russia Formally Recognizes Taliban Government in Afghanistan
Mediators Edge Closer to Israel-Hamas Ceasefire Agreement
Emirates Airline Expands Market Share with New $20 Million Campaign
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
Amazon Reaches Major Automation Milestone with Over One Million Robots
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
China Unveils Miniature Insect-Like Surveillance Drone
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Iran Executes Alleged Israeli Spies and Arrests Hundreds Amid Post-War Crackdown
Trump Asserts Readiness for Further Strikes on Iran Amid Nuclear Tensions
Iran's Parliament Votes to Suspend Cooperation with Nuclear Watchdog
Trump Announces Upcoming US-Iran Meeting Amid Controversial Airstrikes
Trump Moves to Reshape Middle East Following Israel-Iran Conflict
NATO Leaders Endorse Plan for Increased Defence Spending
U.S. Crude Oil Prices Drop Below $65 Amid Market Volatility
Explosions Rock Doha as Iranian Missiles Target Qatar
“You Have 12 Hours to Flee”: Israeli Threat Campaign Targets Surviving Iranian Officials
Oman Set to Introduce Personal Income Tax, First in Gulf
Germany and Italy Under Pressure to Repatriate $245bn of Gold from US Vaults
Iran Intensifies Crackdown on Alleged Mossad Operatives After Sabotage Claims
Trump Praises Iran’s ‘Very Weak’ Response After U.S. Strikes and Presses Israel to Pursue Peace
WATCH: Israeli forces show the aftermath of a massive airstrike at Iran's Isfahan nuclear site
We have new information and breaking details to share about what is shaping up to be a historic air campaign tonight
Six Massive Bombs Dropped on Fordow; Trump: 'A Historic Moment for the U.S., Israel, and the World'
Fordow: Deeply Buried Iranian Enrichment Site in U.S.–Israel Crosshairs
United States Conducts Precision Strikes on Iran’s Nuclear Sites
US strikes Iran nuclear sites, Trump says
Pakistan to nominate Trump for Nobel Peace Prize.
Israel Confirms Assassination of Quds Force Commander in Tehran
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
G7 Leaders Fail to Reach Consensus on Key Global Issues
Mass exodus in Tehran as millions try to flee following Trump’s evacuation order
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Netanyahu Signals Potential Regime Change in Iran
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
Iran Conducts Ballistic Missile Launches Amid Heightened Tensions with Israel
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
×