Faced with galloping inflation, the Bank of England raises its key rate to 1%

The headquarters of the Bank of England in London, May 5, 2022. AP - Frank Augstein

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Inflation is galloping almost everywhere in the world, which causes a general movement of the central banks towards an increase of the interest rates.

After a half-point Fed rate hike on Wednesday, May 4, the Bank of England raised its key rate by a quarter point to 1%, its highest level since 2009.

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The Bank of England intends to 

, which it sees climbing above 10% at the end of the year, mainly due to the rise in energy prices.

According to the monetary institute, global inflationary pressures intensified severely after Russia's invasion of Ukraine. 

It was therefore necessary to act quickly.

This is done with this increase in the key rate to 1%.

The debate concerns the monetary policy to be adopted to calm the current inflation, which is already much higher than what was envisaged.

Last March, it was 7% in the United Kingdom.

The challenge is to prevent an excessive increase in prices and wages in the long term, which would have the consequence of fueling inflation in return.

This scenario, likely to turn into a vicious circle, the monetary institute wants to avoid it at all costs.

But it's a double-edged sword: tightening monetary policy could also slow growth, while some economic indicators are already turning red, with a decline in retail sales and a

.

Thus, the Bank of England anticipates a contraction of the British economy of 0.25% in 2023. The British economy would then risk falling into recession.

In addition to the problems affecting the United Kingdom, like all other countries, it must also digest the consequences of its divorce from the European Union.

limits the

number of workers available on the market and makes imports and exports more complex.

According to experts, the balance between inflation and the risk of recession will be very difficult to find.

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