The Bank of England raises interest rates for a number of reasons, but the primary reason is to control inflation.
When inflation is high, the Bank of England may raise interest rates in order to reduce the amount of money circulating in the economy, which can help to lower prices and bring inflation under control.
Another reason why the Bank of England may raise interest rates is to maintain financial stability.
If the Bank of England believes that the level of borrowing in the economy is becoming unsustainable, it may raise interest rates in order to discourage borrowing and reduce the risk of financial instability.
Raising interest rates can also help to support the value of the currency.
When interest rates are higher in one country than in others, it can attract foreign investors who are seeking higher returns on their investments. This can increase demand for the currency and support its value in international markets.
However, raising interest rates can also have negative effects on the economy.
Higher interest rates can make it more expensive for businesses and individuals to borrow money, which can reduce investment and spending. This can slow economic growth and potentially lead to a recession.
Overall, the decision to raise interest rates is a balancing act for the Bank of England, as it seeks to maintain price stability, financial stability, and sustainable economic growth.
