University of Salford Business School Economist, Dr Maria Paola Rana on the Bank of England increasing the interest

Dr Maria Paola Rana, Lecturer in Economics and Finance, University of Salford Business School, commented:

“As widely anticipated, the Bank of England (BoE) has increased the interest rate from 4.25% to 4.5%. Seven out of nine members of the Monetary Policy Committee (MPC), in fact, voted to raise the base interest rate for the 12th consecutive time since December 2021 to an almost 15-year high.

“The justification for the further increase has been, as always, the need to attempt to stop inflation, which according to the members in favour of the rise, has been stronger than expected.

“According to the latest release by ONS on the 19 April, the Consumer Price Index (CPI) rose by 10.1% in the 12 months to March 2023, down from 10.4% in February, but still very high with respect to the 2% inflation target. Also, the Consumer Price Index including owner occupiers’ housing costs (CPIH) rose by 8.9% in the 12 months to March 2023, down from 9.2% in February. Even if energy prices are expected to decrease, food prices will take longer. Inflation is now expected to decrease to 5%, rather than 4%, by the end of 2023.

“Let’s hope that this can be the last increase of twelve since, as pointed out by the only two members who wanted to keep the interest rates at 4.25%, inflation is expected to fall this year and the UK economic outlook is looking better than expected.”