Bank of England Raises Interest Rates for First Time Since 2023

Kathmandu. Bank of England has raised interest rates for the first time since 2023. The central bank of Britain raised its key interest rate to four percent on Thursday. This is the first increase in more than three years. The bank stated that this step has been taken at a time when global inflation has increased due to the sharp rise in energy prices. The central bank has increased the cost of borrowing by 25 percentage points. It has followed the US Federal Reserve and the European Central Bank in raising interest rates since the start of the Middle East conflict. The price of diesel has reached a historic high worldwide due to Ukraine's attacks on Russian fuel processing plants and disruptions to energy supply in the Gulf region due to the US-Iran war. “Due to the increase in energy prices, there is now a greater possibility of sufficient inflation, which makes it necessary for the bank to raise interest rates,” said Bank of England Governor Andrew Bailey in a statement. Bailey said, “Today’s increase should not be understood as the first step in an inevitably long series of increases. It is unlikely to be the last increase as long as the Middle East conflict is not resolved.” Despite rising inflation, the bank has increased its projection for British economic growth for 2026 and 2027. The central bank now estimates that GDP will be 1.6 percent this year and 1.3 percent next year. In July, it had projected GDP growth of 1.1 percent for both years. The Bank of England last raised its key interest rate in August 2023 and had kept the cost of borrowing at 3.75 percent since December. In September, Britain's annual inflation rate rose more than expected to 3.5 percent, well above the bank's target of two percent. The Bank of England said on Thursday that in its main forecast, British inflation is expected to reach up to 4.9 percent in the second quarter of next year. Despite some support from the government in last week's annual budget announcement, millions of British citizens will have to face an increase in fuel and energy bills from the beginning of next year.