The Bank of England raised interest rates from 3.5% to a 14-year high of 4% yesterday (2 February), in the tenth consecutive increase in the policy rate since December 2021.

The central bank also upgraded its growth forecast, saying inflation is likely to have peaked and predicting a shallower recession than feared.

UK government borrowing costs fell to a three-month low and stock prices as markets rallied on the hopes that the Bank is nearing the end of its restrictive monetary policy.

However, the Bank has warned that Britain’s workforce will be permanently smaller after the pandemic, putting the economy on a path of stagnation.

Governor Andrew Bailey discussed the difficulty of separating the combined effects of Brexit, Covid, and the energy crisis, citing these economic shocks as holding back both productivity and labour.

The Bank said: “Global consumer price inflation remains high, although it is likely to have peaked across many advanced economies, including in the United Kingdom.

“Wholesale gas prices have fallen recently and global supply chain disruption appears to have eased amid a slowing in global demand. Many central banks have continued to tighten monetary policy, although market pricing indicates reductions in policy rates further ahead.”