The Bank of England is trying to bring soaring inflation under control by dramatically increasing the cost of borrowing money.
Desperate times call for desperate measures. The Bank of England, effectively the United Kingdom version of the Federal Reserve, has raised interest rates by the highest rate in 33 years.
The Bank of England’s Bank Rate, or the cost of borrowing money, rose by 0.75% to 3%. According to the Monetary Policy Committee (MPC), the Bank of England voted by a majority of 7-2 to increase interest rates to 3%.
The U.K. is battling with high, double-digit inflation. The economic situation has not improved in recent months. The U.K. recorded 10.1% inflation in October, the second time in three months.
The MPC is responsible for setting official interest rates in the U.K.The Monetary Policy Committee report noted:
“Inflation is too high. It is well above our 2% target. It’s our job to make sure that inflation returns to our 2% target.”
The pound sterling tumbled to $1.12 upon the news, as investors lost confidence in the pound sterling. The pound recently hit $1.04, an all-time low, and another indicator of waning investor confidence. The pound rose to a recent high against Bitcoin (BTC), kissing 1 BTC = £18,000.
Interest in crypto has been burgeoning in such an environment. British pound trading volume soared 1,150% in September, while the United Kingdom recently hosted the Bitcoin Collective Conference, which the Chairperson of The Crypto and Digital Assets All-Party Parliamentary Group, MP Lisa Cameron attended.
Cameron affirmed to Cointelegraph in an exclusive interview that the U.K. will become an international hub of crypto and digital assets. However, various challenges and regulatory hurdles stand in their way.
Related: United Kingdom banks are a threat to crypto, and that’s bad news for everyone
Stablecoins were recently renamed by the group, and the new Prime Minister, Rishi Sunak has expressed interest in crypto. Notwithstanding, the economic backdrop in the United Kingdom is increasingly concerning.
British Economist Ed Conway commented that the U.K. is already in a recession, which could be the longest since records began. The MPC predicts inflation will fall sharply from the middle of 2023.