The Bank of England surprised analysts with a smaller rate increase than expected, as it worries about tipping the economy into recession.
| The Bank of England on Thursday raised interest rates for the fifth time in a row, but surprised analysts with a smaller increase than expected as Britain’s economy teeters on the edge of recession.
But the BoE has also cut its forecast for economic growth from last month, and now expects a 0.3 per cent contraction this quarter, against a previous prediction of 0.1 per cent growth.“The bank is clearly more concerned by the outlook for activity than the Fed and some other central banks,” said Paul Dales, chief UK economist at Capital Economics.
The British economy has shrunk for two straight months, and the Organisation for Economic CooperationDevelopment recently forecast that Britain would next year record the second-worst growth in the G20 after Russia. Average weekly earnings increased 6.8 per cent year-on-year in the three months to April, less than forecast. But with the labour market so tight, and inflation expectations “substantially elevated relative to their historic averages”, there is still the potential for a blowout.
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