London Daily

Focus on the big picture.
Wednesday, Sep 17, 2025

BoE becomes first major central bank to raise rates since pandemic

BoE becomes first major central bank to raise rates since pandemic

The Bank of England on Thursday became the world's first major central bank to raise interest rates since the coronavirus pandemic hammered the global economy, and warned inflation was likely to hit 6% in April - three times its target level.

Surprising investors for the second time in six weeks, the BoE said it had to act now, even as the Omicron coronavirus variant sweeps Britain, because it saw warning signs in underlying inflation pressures.

The nine-member Monetary Policy Committee voted 8-1 to raise Bank Rate to 0.25% from 0.1%, with external member Silvana Tenreyro providing the only dissenting voice.

Governor Andrew Bailey said Omicron was already hurting retailers and restaurants but the BoE had felt compelled to stop the recent jump in prices from becoming a longer-term problem.

"We're concerned about inflation in the medium term. And we're seeing things now that can threaten that. So that's why we have to act," Bailey said.

It was unclear whether Omicron would ease or add to inflation pressure "and that's a very important factor for us," he said.

Sterling jumped almost a full cent against the U.S. dollar to its highest since Nov. 30, and interest-rate sensitive two-year gilt yields rose by as much as 9 basis points on the day to 0.58%, their highest since Dec. 1.

Most economists polled by Reuters had expected the BoE to keep Bank Rate at 0.1% due to the Omicron variant, which pushed COVID-19 cases in Britain to a record high on Wednesday.

The BoE pointed to the likelihood of more "modest tightening of monetary policy" over its three-year forecast period although inflation could prove weaker or stronger than expected.

Investors rushed to fully price in another rise in Bank Rate to 0.5% by March and to 1% by September.

The British central bank also wrong-footed many investors on Nov. 4 when it kept Bank Rate on hold to give itself more time to see the extent of any hit to the labour market from the end of the government's job-protecting furlough scheme.

Thursday's rate hike put the BoE ahead of the U.S. Federal Reserve which on Wednesday said it was speeding up a phase-out of its bond-buying stimulus, in a first step ahead of possibly three interest rate rises in 2022.

The European Central Bank and the Bank of Japan are further away from raising borrowing costs.

The ECB on Thursday cut back its stimulus further but promised generous support for the euro zone's economy in 2022.

SHORT-TERM OMICRON HIT SEEN


The BoE cut its growth forecasts for December and the first quarter of 2022 because of Omicron which could lead to "a very high number of infections over a very short period."

A survey of purchasing managers earlier on Thursday showed a hit to hospitality and travel companies this month, sending private sector growth to a 10-month low.

But the BoE also said Britain and the world economy were in a "materially different" situation than at the start of the pandemic, with inflation now elevated.

It focused more on "upside risks" around pay trends and said there was no sign of a jump in unemployment after the end of the government's job-supporting furlough scheme on Sept. 30.

The BoE said it now expected Britain's unemployment rate to fall to around 4% before the end of this year, much lower than a 4.5% projection made only last month.

The rate stood at 4.2% in the three months to October, according to data published earlier this week.

British employers have faced severe staff shortages this year as Brexit compounds the loss of migrant workers caused by the pandemic last year.

The MPC voted 9-0 to keep the central bank's government bond-buying programme at its target size of 875 billion pounds ($1.16 trillion). The BoE has also bought 20 billion pounds of corporate bonds.

Newsletter

Related Articles

0:00
0:00
Close
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
Hong Kong Industry Group Calls for HK$20 Billion Support Fund to Ease Property Market Stress
Joe Biden’s Post-Presidency Speaking Fees Face Weak Demand amid Corporate Reluctance
Charlie Kirk's murder will break the left's hateful cancel tactics
Kash Patel erupts at ‘buffoon’ Sen. Adam Schiff over Russiagate: ‘You are the biggest fraud’
Homeland Security says Emmy speech ‘fanning the flames of hatred’ after Einbinder’s ‘F— ICE’ remark
Charlie Kirk’s Alleged Assassin Tyler Robinson Faces Death Penalty as Charges Formally Announced
Actor, director, environmentalist Robert Redford dies at 89
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
JD Vance Says There Is “No Unity” with Those Who Celebrate Charlie Kirk’s Killing, and he is right!
Trump sues the 'New York Times' for an astronomical sum of 15 billion dollars
Florida Hospital Welcomes Its Largest-Ever Baby: Annan, Nearly Fourteen Pounds at Birth
U.S. and Britain Poised to Finalize Over $10 Billion in High-Tech, Nuclear and Defense Deals During Trump State Visit
China Finds Nvidia Violated Antitrust Laws in Mellanox Deal, Deepens Trade Tensions with US
US Air Force Begins Modifications on Qatar-Donated Jet Amid Plans to Use It as Air Force One
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
Elon Musk Retakes Lead as World’s Richest After Brief Ellison Surge
U.S. and China Agree on Framework to Shift TikTok to American Ownership
London Daily Podcast: London Massive Pro Democracy Rally, Musk Support, UK Economic Data and Premier League Results Mark Eventful Weekend
This Week in AI: Meta’s Superintelligence Push, xAI’s Ten Billion-Dollar Raise, Genesis AI’s Robotics Ambitions, Microsoft Restructuring, Amazon’s Million-Robot Milestone, and Google’s AlphaGenome Update
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Musk calls for new UK government at huge pro-democracy rally in London, but Britons have been brainwashed to obey instead of fighting for their human rights
Elon Musk responds to post calling for the murder of Erika Kirk, widow of Charlie Kirk: 'Either we fight back or they will kill us'
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
USA: Office Depot Employees Refused to Print Poster in Memory of Charlie Kirk – and Were Fired
Proposed U.S. Bill Would Allow Civil Suits Against Judges Who Release Repeat Violent Offenders
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
French Debt Downgrade Piles Pressure on Macron’s New Prime Minister
US and UK Near Tech, Nuclear and Whisky Deals Ahead of Trump Trip
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
Anesthesiologist Left Operation Mid-Surgery to Have Sex with Nurse
Tens of Thousands of Young Chinese Get Up Every Morning and Go to Work Where They Do Nothing
The New Life of Novak Djokovic
The German Owner of Politico Mathias Döpfner Eyes Further U.S. Media Expansion After Axel Springer Restructuring
Suspect Arrested: Utah Man in Custody for Charlie Kirk’s Fatal Shooting
In a politically motivated trial: Bolsonaro Sentenced to 27 Years for Plotting Coup After 2022 Defeat
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Turkish authorities seize leading broadcaster amid fraud and tax investigation
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
ChatGPT CEO signals policy to alert authorities over suicidal youth after teen’s death
The British legal mafia hit back: Banksy mural of judge beating protester is scrubbed from London court
Surpassing Musk: Larry Ellison becomes the richest man in the world
Embarrassment for Starmer: He fired the ambassador photographed on Epstein’s 'pedophile island'
Manhunt after 'skilled sniper' shot Charlie Kirk. Footage: Suspect running on rooftop during panic
Effective Protest Results: Nepal’s Prime Minister Resigns as Youth-Led Unrest Shakes the Nation
Qatari prime minister says Netanyahu ‘killed any hope’ for Israeli hostages
×