Surprise move

Bank of England lifts interest rate to 0.25%

Bank of England

Bank committee members voted 8-1 for a hike

The Bank of England today defied expectations and raised interest rates for the first time in three years.

The rate setting monetary policy committee voted 8-1 in favour of lifting rates 15 basis points from a record low 0.1% to 0.25%.

It comes as inflation has soared to over half the Bank’s target, hitting 5.1%, the highest level in over 10 years.

Sterling rose 0.63% against the dollar at $1.3352. At 12.30pm the FTSE 100 was off its high for the day, but was still strongly higher at 7,245.81, up 75.06 points (1.05%).

Despite inflation rising strongly last month, analysts had expected the MPC to leave rates unchanged amid concern that the Omicron variant of Covid could slow the UK economy by causing people to spend less.

There are also other cost pressures in the economy, not least energy and the price of importing goods which are squeezing company balance sheets.

The committee said the Omicron variant “is likely to weigh on near-term activity” but judged that “its impact on medium-term inflationary pressures is unclear at this stage”.

It also voted unanimously to maintain the Bank’s asset purchase scheme at £875bn.

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