Bank of England raises UK interest rates by quarter point to 4.25%
The Bank of England has raised interest rates by a quarter of a percentage point to 4.25% in response to higher than expected UK inflation.
The Bank’s monetary policy committee (MPC) voted to increase the base rate for an 11th consecutive time, judging that higher borrowing costs are still required to tackle inflation despite gathering storm clouds for the economy.
UK rates are now at the highest level since October 2008, just as the global economy was in the grips of the financial crisis.
The development comes after the UK’s annual inflation rate unexpectedly rose in February to 10.4% from 10.1% in January, fuelled by soaring food prices.
The rise in UK inflation – which is at odds with the US and eurozone where headline inflation fell last month – prompted economists to predict Thursday’s move by the Bank of England as it seeks to subdue demand to bring inflation down. Its official target for inflation is 2%.
However, the rise comes amid heightened concerns over the fallout in global markets from the failure of Silicon Valley Bank and the Swiss government-brokered rescue of Credit Suisse, in a fortnight evoking painful memories of the run-up to the 2008 banking crash.
The Bank of England’s decision came a day after the US Federal Reserve raised its benchmark interest rate by a quarter of a percentage point to a range of 4.75% to 5%.
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