After yesterday’s US Federal Reserve rate increase by 0.5% to a target range of 0.75%pa to 1%pa, the Bank of England followed suit today with, yet another 0.25% increase rate rise to 1%pa.
Both the UK and US economies have suffered their biggest inflation rises in over 40 years and have increased rates respectively to similar levels.
The Monetary Policy Committee voted by majority to increase rates by 0.25% and even 3 out of the 9 voted for a double 0.25% increase i.e., 0.5%.
We know about cost-of-living rises driven by additional demand after lockdown, materials, goods, and microchip shortages. In addition, the Ukraine/Russia conflict has caused energy price rises. We also know that governments do want inflation to devalue covid-19 borrowing.
We also believe that matching interest rate rises with the US brings stability to currency exchange and therefore trade between the UK and USA.