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’s 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 United Kingdom. Its 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.”
Danny Scott, CEO of U.K. based Bitcoin exchange, CoinCorner shed light on the situation. Scott told Cointelegraph, “People have got used to cheap money being readily available, and lifestyles have changed as a consequence, the music is now stopping and people will be facing a new reality.”
“The struggle will get worse for things like first-time buyers trying to get a mortgage, it’s becoming a dire situation for people getting onto the property ladder.”
The pound sterling tumbled to $1.12 upon the news as investors lost confidence. It 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 18,000 euros per 1 BTC.
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 was attended by Member of Parliament Lisa Cameron, the chairperson of The Crypto and Digital Assets All-Party Parliamentary Group.
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 the 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. Scott from CoinCorner concurred, he told Cointelegraph “Recession is well and truly underway.” The MPC predicts inflation will fall sharply starting in the middle of 2023.
