Bank of England raises interest rates for first time since 2023
Governor Andrew Bailey warned that further rate increases may be necessary if the US-Iran conflict continues.
The Bank of England (BoE) raised interest rates to 4 per cent from 3.75 per cent on Thursday, marking the first increase in over three years, according to a Business Standard report.
The Monetary Policy Committee (MPC) voted 8-1 to implement the hike. While most members supported the move, policymaker Catherine Mann voted for a larger half-point increase to 4.25 per cent.
Governor Andrew Bailey stated that unless the Middle East conflict is resolved, the current rise may not be the last. He noted that without news softening inflationary risks, there is an argument for further increases.
The central bank predicted that British inflation is likely to reach an average of 4.8 per cent in the second quarter of next year. This is more than double the bank's target.
The BoE also revised its growth expectations upward to 1.6 per cent for this year and 1.3 per cent for next year. It attributed some of this strength to artificial intelligence spending and the recent annual budget by Finance Minister John Healey.
Deputy Governor Clare Lombardelli said a further rate hike is likely to be needed in the near term. Other members, including Megan Greene and Huw Pill, also discussed the need for additional tightening.