The Bank of England raised interest rates by 0.25 percentage points on Thursday, signalling that it would “act forcefully” if needed to prevent high inflation becoming more persistent.
The increase — the fifth time the bank’s Monetary Policy Committee has voted to tighten policy at successive meetings — takes the BoE’s benchmark rate to 1.25 per cent. But in a split vote, the committee held back from making a bigger 0.5 percentage point move, which won support from just three members.
It also changed its guidance on the likely path of interest rates at future meetings, saying that the scale, pace and timing of further increases would reflect the evolving economic outlook, and that the committee would be “particularly alert to indications of more persistent inflationary pressures”. It had previously said “some degree of further tightening” might be appropriate in the coming months”.
The measured approach is in contrast with the more aggressive action taken this week by the US Federal Reserve, which on Wednesday raised its benchmark rate by 0.75 percentage points, while signalling that further rate increases could be both larger and swifter than expected.
The pound fell after the Bank of England announcement, extending early losses to trade 0.9 per cent lower at $1.2066.
