Prices rose 7 percent in Britain in March from a year earlier, the fastest pace since 1992. The central bank predicts the inflation rate will peak above 10 percent in the last quarter of the year, when household energy bills will increase again after the government’s energy price cap is reset in October. Ten percent would be the highest rate since 1982.
The rapidly changing landscape was reflected in the prospects for economic growth. In 2023, the bank now predicts, the economy will shrink 0.25 percent instead of growing 1.25 percent, which it predicted three months ago.
On Wednesday, policymakers at the U.S. Federal Reserve increased interest rates half a percentage point, the biggest jump in 22 years, in an effort to cool down the economy quickly as inflation runs at its fastest pace in four decades. The U.S. central bank also said it would begin shrinking its balance sheet, allowing bond holdings to mature without reinvestment.
On Thursday, the Bank of England said its staff would begin planning to sell the government bonds it had purchased, but a decision on whether to commence these sales hasn’t been made. The bank stopped making new net purchases at the end of last year after buying 875 billion pounds ($1.1 trillion) in bonds. The bank said it would provide an update in August.
The outlook for the global economy has been rocked by the war in Ukraine, which is pushing up the price of energy, food and other commodities such as metals and fertilizer. The Covid-19 pandemic continues to disrupt trade and supply chains, particularly from shutdowns stemming from China’s zero-Covid policy. Last month, the International Monetary Fund slashed its forecast for global economic growth this year to 3.6 percent from 4.4 percent, which was predicted in January.
Article source: https://www.nytimes.com/2022/05/05/business/economy/bank-of-england-rates-inflation.html
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