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The Bank of England raised interest rates by a quarter point to 4.25 percent, as policymakers remained focused on battling inflation even as concerns over the health of the global financial system linger.
The Bank’s monetary policy committee voted 7-2 to increase the key interest rate. Two members preferred to maintain the Bank Rate at 4 percent, the BoE said in a statement today.
Analysts had expected another rise in interest rates before the recent turmoil in financial markets sparked speculation that policymakers may put increases on hold. Latest inflation data, which defied expectations that the U.K. had left double-digit inflation levels behind, tipped the balance on the Committee in favor of tightening.
On Wednesday, data released by the Office for National Statistics showed inflation quickened to 10.4 percent in February, from 10.1 percent the previous month.
At its previous policy meeting, the Old Lady of Threadneedle street signaled that it may too soon to pause its hiking cycle. It maintained the message that is sees less urgency, while warning that “uncertainties around the financial and economic outlook have risen.”
“The MPC will continue to monitor closely indications of persistent inflationary pressures, including the tightness of labour market conditions and the behaviour of wage growth and services inflation. If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required,” it said.
The MPC will adjust the Bank Rate as necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit.
The BoE’s decision follows a move by the Swiss National Bank earlier in the day to raise rates by half a percentage point. This came even as the SNB found itself in the eye of the latest banking storm in Europe as it was forced to engineer a merger of its two banking giants, Credit Suisse and UBS.
