File Photo: A bus drives past the Bank of England before the release of the Monetary Policy Report at the Bank of England in London, Thursday, May 5, 2022. AP
While the United Kingdom's central bank began raising interest rates earlier than its counterparts, the Bank of England is now trailing the U.S. Federal Reserve in the worldwide fight against inflation fueled by soaring food and energy prices.
The Bank of England's action Thursday took its key rate to 1.25% and marked five consecutive increases that began in December.
The Fed raised its benchmark rate by three-quarters of a percentage point Wednesday, pushing it to a range of 1.5% to 1.75%.
The war in Ukraine has boosted food and energy prices as the fighting disrupts shipments of oil, natural gas, grain and cooking oil. That is adding to price increases that began last year as the global economy started to recover from the COVID-19 pandemic.
The Bank of England last month forecast that inflation would accelerate to more than 10% later this year after reaching 9% in April, already the highest since 1982. The bank's inflation target is 2%.
Bank of England policymakers have been cautious about raising interest rates too quickly, arguing that many of the British economy's inflationary pressures are external and beyond the bank's control.
But price increases are now becoming embedded in the economy, fueling demands for higher wages and slowing economic growth as consumers and businesses curtail purchases.
Figures released this week by the Office for National Statistics showed that economic output stagnated in February and shrank by 0.1% in March, raising concerns that Britain may be headed for a recession.
The World Bank last week downgraded its outlook for the global economy and raised concerns about the return of "stagflation'', the combination of high inflation and sluggish growth last seen in the 1980s.
Federal Reserve Chairman Jerome Powell acknowledged the challenges facing monetary policymakers when he spoke to reporters on Wednesday.
"This is an extraordinarily unusual time, and we really don't have a template or any experience of a situation like this,'' he said. "And so, I think we have to be humble about our ability to understand the data. . We need to see more data. We need to be a little bit patient.''