BoE raises interest rates to 0.25% amid rising inflation

The Bank of England (BoE) has raised UK interest rates from record lows of 0.1 per cent to 0.25 per cent for the first time since the beginning of the pandemic. The Monetary Policy Committee (MPC) voted by a majority of 8-1 to take action amid pressure from the International Monetary Fund (IMF), who discouraged it from any more delays. It also voted 9-0 to maintain the amount of quantitative easing at £895bn.
According to the Office for National Statistics, UK inflation soared to its highest level in more than a decade last month, climbing to 5.1 per cent. This was significantly more than the Bank of England’s two per cent target and well above the expectations of 4.5 per cent, due to the rising cost of clothing, fuel, and second-hand cars.
Threadneedle Street said, “Bank staff expect inflation to remain around five per cent through the majority of the winter period, and to peak at around six per cent in April 2022, with that further increase accounted for predominantly by the lagged impact on utility bills of developments in wholesale gas prices.”
The UK’s main interest rate has been at 0.1 per cent since the pandemic began, having been set at 0.75 per cent pre-pandemic. A rise to 0.25 per cent has been the lowest the bank has ever set. Analysts have said that they expect the rate to be hiked to pre-pandemic levels in the next 18 months as the economy resumes a more steady course.