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The Bank of England raised UK interest rates by 50 basis points on Thursday, as expected.
The central bank raised rates to 3.50% from 3.0% previously. Market consensus, as cited by FXStreet, had expected this rise by Threadneedle street.
Six members back the half a percent hike, while Swati Dhingra and Silvana Tenryro backed no change and Catherine Mann favoured a larger 75 basis point hike.
At its last meeting in November, the bank increased the bank rate by 0.75% to 3.0% by a majority of seven to two.
Looking forward, the monetary policy committee said that there are ‘considerable’ uncertainties around the UK’s outlook and confirmed that it will respond ‘forcefully, as necessary’.
‘Should the economy evolve broadly in line with the November Monetary Policy Report projections, further increases in Bank Rate might be required for a sustainable return of inflation to target [of 2.0%],’ the bank said.
Bank staff said it now expects UK gross domestic product to decline by 0.1% in the final quarter of 2022, 0.2 percentage points stronger than expected in the bank’s November report.
It added that inflation is expected to continue to fall gradually over the first quarter of 2023, as earlier increases in energy and other goods prices drop out of the annual comparison.
The decision comes a day after the US Federal Reserve lifted its own interest rates by 50 basis points, as expected, taking the range for the federal funds rate to 4.25% to 4.50% - the highest since 2007 - from a previous range of 3.75% to 4.00%.
Still to come on Thursday, the European Central Bank will reveal its own interest rate decision. The Frankfurt-based bank is widely expected to raise rates by half a percent.
By Heather Rydings, Alliance News senior economics reporter
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