Last month, the Bank of England raised the interest rates from 0.25% to 0.5%, which was the first increase in 10 years. Yet, in the Monetary policy committee (MPC), they stated that there would be a “modest” increase in interest rates over the next few years.
At this month’s meeting (December) the members of the MPC decided to keep interest rates at 0.5%. This is due to the level of unemployment being down, rising inflation and stronger global growth.
In November, inflation rates rose to 3.1%, which is the highest in nearly 6 years. Yet the average weekly wage is growing at a rate of just 2.2%.
The national target inflation rate for the UK is set to 2%, however, the UK is now 1.1% above this national target. This means that Mark Carney; the governor of the Bank of England will have to write a public letter to the Chancellor of the Exchequer.
This is due to a rule stating that if the inflation rate rises or drops 1% above or below the national target of 2%, then a letter has to be written. Within the letter, it will state how Mark will aim to get it down to 2%. This letter will be publically announced in February 2018, along with the quarterly inflation report from the Bank of England.
The last time Mark Carney wrote a public letter was December 2016, as in October that year, the inflation rate dropped to 0.9% (1.1% under the national target).
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