Bank of England raises rates for thirteenth consecutive time

Rates have now reached 5%

22 June 2023

The number seven seems to be a slightly inglorious collective at present. Today, seven committee members of the nine at the Bank of England (BoE) voted to raise rates by 50 bps to 5%. This was against market expectations of a quarter point hike but after yesterday’s sticky inflation numbers, it was perhaps not a surprise that more aggressive action was seen as warranted. Noting inflation is more persistent than forecast (no kidding), the minutes of the committee meeting highlight that additional hikes will occur should this inflation persistence be more persistent. Sometimes we get lost in the narrative and this statement seems a worthy example.

Markets have been caught out by this sudden more hawkish behaviour from the BoE as it probably skews the outlook for the UK economy as these heavy brakes are applied. Perhaps though we should conclude that the BoE has finally stepped up more forcefully to address one of its mandates – price stability. While it has been behind the curve for so long during this inflation revival, at least now it is getting close to being at the curve. Economic misery for those homeowner mortgages refixing to higher levels will obviously be unwelcome but this was the only way, the BoE concluded.