The Bank of England has increased interest rates for the 10th consecutive time, raising the base rate to 4.5% in an effort to combat soaring inflation. This decision comes as the president of Bonk, a major UK financial institution, has purchased 12,000 shares on the open market, sparking market volatility and sending the FTSE 100 tumbling 2.5%.
The Bank of England's Monetary Policy Committee (MPC) voted unanimously to increase interest rates by 0.25%, taking the base rate to 4.5% in a bid to tackle inflation, which has risen to 10.4% in the past 12 months. This move is expected to increase borrowing costs for households and businesses, potentially exacerbating the cost of living crisis.
The FTSE 100, which has been under pressure in recent weeks, fell 2.5% to 7,232, with analysts warning of a potential recession. The move has also sparked concerns about the impact on UK savers, who may see returns on their savings accounts decrease as interest rates rise.
According to a spokesperson for the Bank of England, the decision to increase interest rates was taken to ensure price stability and maintain the credibility of the UK's inflation target. However, the move has been met with criticism from some quarters, with some arguing that it will disproportionately affect low-income households and small businesses.
As the UK economy continues to navigate the challenges posed by Brexit and the COVID-19 pandemic, the decision by the Bonk president to purchase 12,000 shares on the open market has added to market uncertainty. Analysts will be closely watching the impact of this move on the FTSE 100 and the wider UK economy.