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BOE Becomes First Major Central Bank to Raise Rates Since COVID-19 Pandemic: Reuters

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BOE Becomes First Major Central Bank to Raise Rates Since COVID-19 Pandemic: Reuters
A bus passes in front of the Bank of England, in London, Britain October 31, 2021. REUTERS/Tom Nicholson/File Photo. Courtesy of Reuters.

LONDON (Reuters) – The Bank of England on Thursday became the world’s first major central bank to raise interest rates since the coronavirus pandemic hammered the global economy, and warned inflation was likely to hit 6% in April – three times its target level.

Surprising investors for the second time in six weeks, the BoE said it had to act now, even as the Omicron coronavirus variant sweeps Britain, because it saw warning signs in underlying inflation pressures.

The nine-member Monetary Policy Committee voted 8-1 to raise Bank Rate to 0.25% from 0.1%, with external member Silvana Tenreyro providing the only dissenting voice.

Governor Andrew Bailey said Omicron was already hurting retailers and restaurants but the BoE had felt compelled to stop the recent jump in prices from becoming a longer-term problem.

“We’re concerned about inflation in the medium term. And we’re seeing things now that can threaten that. So that’s why we have to act,” Bailey said.

It was unclear whether Omicron would ease or add to inflation pressure “and that’s a very important factor for us,” he said

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