The Bank of England has raised interest rates to 1.25 per cent and predicted inflation could top 11 per cent this year.
The Bank’s Monetary Policy Committee voted to up the cost of borrowing by 0.25 percentage points, rather than a more aggressive 0.5 percentage points which three of the Committee’s nine members voted for.
It’s the MPC’s fifth successive hike. The Bank said it will “act forcefully” if it needs to, to prevent persistent inflation.
Raising interest rates too quickly could cause the economy to slow, plunging Britain into a recession.Yet the Bank also warned that headline inflation could push past 11 per cent by the autumn, one per cent higher than its May prediction for the end of the year. Either way, it is far above its two per cent target.
This decision comes after the US Federal Reserve’s decision on Wednesday to raise interest rates by 0.75 per cent, its biggest hike since 1994.