The Bank of England (BoE) has announced it will raise interest rates from 4.25 per cent to 4.5 per cent.
UK inflation is expected to fall slower than previously expected while food prices will remain high, the BoE has said. Higher food prices have been partly blamed on Russia's war with Ukraine as well as poor harvests in some European countries, indirectly increasing the cost of living in the UK.
Meanwhile, Consumer Price Index (CPI) inflation is expected to decline slower than the Bank previously predicted in February's report. However, inflation levels are expected to drop significantly from April this year due to declining energy prices and subsidised household bills, the Monetary Policy Committee said.
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“There remain considerable uncertainties around the pace at which CPI inflation will return sustainably to the 2 per cent target,” it added.
In a report, the Bank of England’s MPC said: “In the modal forecast conditioned on market interest rates, and taking account of stronger paths for food prices and demand growth, CPI inflation is expected to decline somewhat less rapidly compared with the February report.”
Speaking about the troubles that have hit banks in recent months, it added: “Risks remain but, absent a further shock, there is likely to be only a small impact on GDP from the tightening of credit conditions related to recent global banking sector developments.”
It added: “The committee judges that growth over much of the forecast period will be materially stronger than in the February report. This reflects stronger global growth, lower energy prices, the fiscal support in the spring Budget and the possibility of lower precautionary saving by households than previously thought.”
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