2023.03.2312:38:00UTC+00Bank Of England Raises Key Rate As Expected

The Bank of England hiked its key interest rate for the eleventh consecutive session on Thursday as an unexpected rise in inflation compelled policymakers to ignore the banking sector turmoil.

The nine-member Monetary Policy Committee decided to lift the bank rate by 25 basis points to 4.25 percent. This was the highest rate since 2008.

Seven members of the panel voted for a quarter point hike, while Swati Dhingra and Silvana Tenreyro again sought to maintain the status quo.

In the current tightening cycle that began in December 2021, the rate was raised by 415 basis points.

Most of the members observed that headline inflation had surprised significantly on the upside and the near-term path of GDP was likely to be somewhat stronger than expected previously.

"Renewed and sustained demand for labor could still reinforce the persistence of higher costs in consumer prices, even if second-round effects related to energy price inflation were to diminish," the minutes said.

The MPC vowed to continue to monitor closely indications of persistent inflationary pressures, including the tightness of labor market conditions and the behavior 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," the panel said.

The BoE announcement came after the US Federal Reserve raised its benchmark rate by 25 basis points on Wednesday and signaled that the tightening cycle is nearing an end. The bank is expected to lift the rate just one more time this year.