The Bank of England raised its key interest rate by a quarter of a percentage point to a 15-year peak of 5.25% on Thursday, and gave a new warning that borrowing costs were likely to stay high for some time.
Unlike the U.S. Federal Reserve or the European Central Bank – which also both raised rates by a quarter-point last week – the BoE’s Monetary Policy Committee gave little suggestion that rate hikes were about to end as it battles high inflation.
There had been fears, certainly among hard-pressed households and businesses, that the bank would repeat its outsized half-point increase from June. But figures last month showing that inflation fell more than anticipated to 7.9% eased the pressure to act as aggressively again. With inflation four times the bank’s 2% target, the bank is expected to raise interest rates again over the coming months.
British inflation hit a 41-year high of 11.1% last year and has fallen more slowly than elsewhere, dropping to 7.9% in June, the highest of any major economy.
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