London, Sep 23 (IANS) To tackle high inflation, the Bank of England (BoE) has increased interest rates by 0.5 percentage points to 2.25 per cent, the highest since 2008 and the seventh successive since December 2021, as well as the second 50-basis-point increase in a row.
The central bank announced on Thursday that it will “take the actions necessary” to return inflation to the 2 per cent target sustainably in the medium term, reports Xinhua news agency.
The country’s consumer price index (CPI) rose by 9.9 per cent in the 12 months to August, down from the 40-year high of 10.1 per cent in July.
Also on Thursday, the BoE decided to reduce the stock of purchased UK government bonds financed by the issuance of central bank reserves by 80 billion pounds ($90 billion) over the next 12 months to a total of 758 billion pounds.
The bank said that its staff now expected the UK’s gross domestic product (GDP) to fall by 0.1 percent in the third quarter, below August’s projection of 0.4 per cent growth, and a second successive quarterly decline.
It cemented fears that the UK economy will soon slide into recession.
Despite support packages announced by the UK government this month to cap energy prices, the BoE said energy bills will still go up and, combined with the indirect effects of higher energy costs, inflation is expected to remain above 10 percent over the following few months, before starting to fall back.