The Bank of England raised interest rates on Thursday by half a percentage point to 3.5 per cent, the highest level in 14 years, warning that further rate rises were likely.
In a vote showing a large majority on the central bank’s Monetary Policy Committee for “forceful” action against inflation, six of the nine members voted for the increase and one favoured a larger 0.75 percentage point hike.
The bank has now increased interest rates at each of the past nine meetings, the most aggressive set of hikes since 1989.
This majority of MPC members said further rate rises were likely but gave no indication whether they thought interest rates needed to rise as high as financial market expectations, which currently forecast a peak official interest rate of just above 4.5 per cent by the middle of 2023.
This group indicated that “further increases in Bank Rate may be required for a sustainable return of inflation to target” if the economy performs as they expect next year.
Two members voted to keep interest rates on hold at 3 per cent, saying that the level of borrowing costs was already high enough to curb spending and bring inflation down to the BoE’s 2 per cent target.