By Geoffrey Smith
Investing.com -- The Bank of England raised its key interest by 50 basis points to a new 14-year high of 3.50%, its latest shot at trying to tame rampant inflation without pushing the U.K. economy into a deep recession.
The step is smaller than the 75 basis point hike announced at the Bank's last meeting and reflects the fact that quarterly GDP growth has been negative for three months already, but also the fact that both inflation and wage growth remain uncomfortably high.
"The labor market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response," the Bank said in a statement detailing its decisions.
Headline inflation fell by more than expected in November but at 10.7% remained far above the Bank's 2% target. Average earnings, meanwhile, are rising at their fastest rate since records began, except for a brief period during the pandemic.
The Bank said its nine-strong Monetary Policy Committee has split three ways, with six members voting for the 50 basis point hike, one voting for a hike of 75 basis points, and two voting to keep the Bank rate unchanged at 3.0%
The Bank's action follows a similar move by the Federal Reserve on Wednesday in trimming the size of its interest rate increases to 50 basis points from 75, amid increasing signs of an economic slowdown in the U.S. Fed chair Jerome Powell had reiterated, however, that the Fed still has "a ways to go" in raising rates, whereas most economists expect the BoE to halt its rate increases early next year.