By
Chimamanda U. Martha
April 15th, 2024
The goal of the Bank of England and other global central banks is to lower inflation. The BoE is committed to doing this through additional interest rate hikes.
Inflation in the United Kingdom (UK) is receding as recent data from the Office of National Statistics (ONS) pegs the current figure at 10.1% for January. According to a report by CNBC, the inflationary drop is lower than the 10.3% projected by economists, a show of the positive turns in the Bank of England’s monetary policies.
The year 2022 was marred by soaring prices across various economies including the United Kingdom. Inflation in Britain rose as high as 11.1% in October last year, representing a 41-year high in what looks like the peak of economic turmoil stemming from the COVID-19 era. After much intervention, the interest rate dropped to 10.5% in December.
The Bank of England has stepped up to the task of tapering the flaming hot inflation. The bank has announced 5 interest rate hikes since the start of last year to date. The most recent interest rate hike came as early as the second of this month in which the bank unveiled a 50 basis points hike.
Following the series of hikes implemented thus far, the apex bank’s main rate now stands at 4%. The biggest contributor to the reduced inflationary rate was recorded in the transportation sector, restaurants, and hoteling. The Core CPI which does not factor in food, energy, alcohol, or tobacco came in at 5.3%. This figure outpaces the CPI for December which was pegged at 5.8%.
The record inflationary surge came following the full-blown invasion of Ukraine by Russia. The aftermath of this war is being felt by the cut in the energy supply chain which has led to an increase in the prices of energy across the board. Electricity costs as well as food, housing, gas, and non-alcoholic beverages are also major contributors to higher inflation.
Rebalancing the Inflation in the UK Economy
The goal of the Bank of England and other global central banks is to lower inflation as best as possible. The BoE is committed to doing this through additional interest rate hikes if required. By drawing on the dangers of the interest rate hike which is often manifested as recession, the BoE officials revealed earlier this month a “much shallower” recession than previously feared.
Notably, the bank is keeping an eye on its monetary tightening policies to avoid slipping into recession. Nonetheless, it looks towards additional measures to achieve its Core CPI falls to the project range of 4%.
The need to make things affordable for UK households is very important as earnings are falling behind the inflationary surge. According to a recent report by the ONS, the median pay amongst workers in Great Britain grew by just 5.9% between October and December last year. This still falls behind the current inflation mark and generally makes the living conditions of most residents a tough one.