Global energy crisis hit England: Interest rate increase from the Central Bank

The Bank of England (BoE) announced its interest rate decision, which is closely followed by the markets. Meeting under the shadow of the global energy crisis and geopolitical risks, the BoE Monetary Policy Committee increased the policy rate by 25 basis points to 4 percent, in line with market expectations.

1 VOTES AGAINST THE BOARD

It was noteworthy that the decision was not taken unanimously. While 8 members, including BoE Governor Andrew Bailey, voted in favor of increasing the interest rate by 25 basis points, another member took a 'hawkish' stance and demanded that the interest rate be increased by 50 basis points to 4.25 percent.

'WAR' EFFECT ON INFLATION AND 5 PERCENT EXPECTATION

In the decision text, extensive space was devoted to the upward pressure on global energy prices of the war in the Middle East, which has entered its 9th month. In the statement, it was emphasized that the increase in energy costs will continue to be reflected in household and company bills; It was stated that annual inflation, which reached 3.5 percent in September, is expected to climb up to 5 percent by the middle of 2027. It was noted that economic activity data and inflationary pressures that exceeded expectations in recent months were decisive in the decision to tighten monetary policy.

'IT IS HARD TO END THE WAR BEFORE IT'S OVER'

Emphasizing that the rate of inflation decline remains uncertain, BoE Governor Andrew Bailey made striking evaluations regarding the decision taken. Stating that inflationary pressures arising from energy prices necessitated the interest rate increase, Bailey said, "Today's decision should not be seen as the first step in an inevitably long process of interest rate increases. However, as long as the conflict in the Middle East does not end, it does not seem likely that this will be the last interest rate increase." Bailey added that they will evaluate the data at each meeting and take new steps when necessary in order to reduce inflation to the 2 percent target in the medium term.