For now, global central bankers are focused on taming inflation. On Wednesday, the Federal Reserve raised U.S. interest rates for the first time since 2018 and projected six more increases this year as inflation soars. Last week, the European Central Bank moved closer to raising its interest rates when it proposed an end date for its bond-buying program. On Thursday, Christine Lagarde, the president of the European Central Bank, said Europe was unlikely to return to prepandemic inflation patterns, which consistently undershot the bank’s target.
For Britain, and Europe as a whole, the economic ramifications of war come on the heels of an energy price shock that started last fall and just months after the economy regained its prepandemic size.
“The economy has recently been subject to a succession of very large shocks,” the Bank of England said on Thursday. “Russia’s invasion of Ukraine is another such shock.” If energy and commodity prices stay high, they will weigh on Britain’s economy.
“This is something monetary policy is unable to prevent,” the bank added.
The bank’s run of rate increases began in December, the first move higher in three and a half years. The rate had been 0.1 percent since March 2020, when the onset of the pandemic sent financial markets careening and the government first introduced lockdown measures.
On Thursday, the bank said it had raised interest rates in order to stop higher trends in pay and consumer prices from becoming stronger and entrenched.
Article source: https://www.nytimes.com/2022/03/17/business/economy/bank-of-england-rates.html
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