Reuters
Bank of England raises rates to 2.25%, despite likely recession
The Bank of England raised its key interest rate to 2.25% from 1.75% on Thursday and said it would continue to “respond forcefully, as necessary” to inflation, despite the economy probably already being in a shallow recession. The central bank cut its forecast for the peak in British inflation to just under 11% from more than 13%, following Prime Minister Liz Truss’s plan to cap energy prices, but warned that the policy could create longer-term price pressures. Economic demand was likely to be stronger thanks to the energy price cap, the BoE said, but in the immediate term it cut its forecast for the three months to September to show a fall of 0.1%, down from growth of 0.4% forecast in early August.