The Bank of England Should Raise Rates One Last Time
UK policymakers should combine tough action on inflation this week with a subsequent pause to assess the effects of higher borrowing costs.
Time for UK policymakers to step back and reflect.
Photographer: Hollie Adams/Bloomberg50-and-done has a nice ring to it. The Bank of England should live up to market expectations and raise its official interest rate by 50 basis points to 4% on Thursday. But then it should take a breather while assessing the economic impact of the 15-month hiking cycle that’s lifted borrowing costs from near zero.
The BOE was the first major central bank both to increase rates and to start reducing its quantitative-easing stimulus. It was also the first mover in actively selling its QE bond holdings back into the secondary market. The UK should blaze a trail again by calling time on further action after tightening at 10 consecutive meetings — but combine its a pause-for-now message with one final half-point increment to show it’s not going soft on inflation.