The Bank of England has announced its biggest interest rate increase in three decades as it tries to beat back stubbornly high inflation fuelled by Russia’s invasion of Ukraine and the disastrous economic policies of former Prime Minister Liz Truss.The bank boosted its key rate by three-quarters of a percentage point Thursday, to 3%, after consumer price inflation returned to a 40-year high in September.

The aggressive move to prevent inflation from becoming embedded in the economy was in line with market expectations after a more cautious half-point increase six weeks ago. The interest rate decision is the first since Truss’ government announced 45 billion pounds ($52 billion) of unfunded tax cuts that sparked turmoil on financial markets, pushed up mortgage costs and forced Truss from office after just six weeks.Her successor, Rishi Sunak, has warned of spending cuts and tax increases as he seeks to undo the damage and show that Britain is committed to paying its bills.

The rate increase is the Bank of England’s eighth in a row and the biggest since 1992. It comes after the U.S. Federal Reserve on Wednesday announced a fourth consecutive three-quarter point jump as central banks worldwide combat inflation that is eroding living standards and slowing economic growth. The Bank of England is expected to announce its biggest interest rate increase in three decades Thursday as it seeks to beat back stubbornly high inflation fueled by Russia’s invasion of Ukraine and the disastrous economic policies of former Prime Minister Liz Truss.

Economists expect the bank to boost its key rate by at least three-quarters of a percentage point, to 3%, after consumer price inflation returned to a 40-year high in September.

Plus, wholesale natural gas prices, while down from their August peak, are likely to rise again this winter, driving up energy bills and further fuelling a cost-of-living crisis.

                Source: AP