The Bank of England (BoE) is raising the base interest rate by 0.5% to 3.5% following a Monetary Policy Committee (MPC) meeting on Wednesday (14 December).
The MPC voted by a majority of 6-3 to increase the rate by 0.5%. Two committee members voted to maintain the previous 3% rate, while one member voted to raise it to 3.75% instead.
The majority of the committee agreed that further increases in the bank rate may be necessary to return inflation to its 2% target in a sustainable way. Rates could peak at 4.25% in 2023, and are unlikely to be cut next year.
According to the MPC's projections, the UK economy will be in recession for a prolonged period, with inflation remaining very high in the short term. The Bank expects inflation to fall sharply in mid-2023, to some way below the 2% target in years two and three of the projection.
In a press release the MPC said:
"If the outlook suggests more persistent inflationary pressures, the Committee will respond forcefully, as necessary.
"The MPC will take the actions necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit."
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