Bank of England raises rates to 2.25%, despite likely recession

Reuters, LONDON, September 22 - In spite of the economy entering a recession, the Bank of England said it would continue to "act strongly, 

as appropriate" to inflation on Thursday by increasing its benchmark interest rate from 1.75% to 2.25%.

The BoE predicts that the British economy would contract by 0.1% in the third quarter,

in part because of the additional public holiday for Queen Elizabeth's burial.

 This, along with a decrease in output in the second quarter, satisfies the criteria for a technical recession.

The financial markets had banked on a three-quarter-point jump, the biggest since 1989, barring a brief, unsuccessful attempt to strengthen sterling in 1992.

Economists polled by Reuters last week had predicted a repetition of August's half-point increase in rates.

The BoE action comes as central banks around the world struggle with the effects of the COVID labour shortage and the influence of Russia's invasion of Ukraine on oil prices.