News Release
Bank of England Raises Interest Rates by 0.25% to 7.25%
06 November 1997
The Bank of England’s Monetary Policy Committee has today voted to raise the Bank’s repo rate by 0.25% to 7.25%. The increase takes immediate effect.
The Committee reviewed the latest monetary and economic data and discussed the analysis and inflation projection to be incorporated in the Bank’s Inflation Report which will be published on 12 November. It also considered the possible impact of recent financial market volatility.
Inflation has not moderated as much as expected in the light of sterling’s appreciation since the autumn of 1996. Domestic demand has remained robust, and the expected impact on external trade, lowering export volumes and raising import volumes, has yet to materialise, so that GDP has continued to grow at an unsustainable rate. The labour market has tightened further, with skill shortages increasingly reported.
Looking ahead, the economy is expected to slow down next year as both domestic demand and net external trade moderate, under the combined impact of past tightening in monetary and fiscal policy, the strength of sterling, and a smaller impact of windfalls on consumption. This will help to reduce inflationary pressures. But, in the Committee’s judgment, the balance of risks implies that a modest further increase in interest rates is necessary to meet the inflation target of 2½% in the medium term.
The Committee therefore voted to raise interest rates by 0.25%. The last change in interest rates was a rise of 0.25% on 7 August.
Minutes of today's Monetary Policy Committee meeting will be published on 10 December. Minutes of the meeting held in October will be published on 12 November.
