The Bank of England on Tuesday raised its benchmark interest rate by 50 basis points to 1.75%, marking the biggest rise in interest rates since central bank independence in 1997.
“Inflationary pressures in the UK and the rest of Europe have intensified significantly since May’s monetary policy report and the previous MPC meeting,” the BoE said in a statement.
The move comes as central banks around the world step up their efforts to bring inflation under control. Last month, the European Central Bank raised interest rates by 50 basis points, more than initially expected, while the Federal Reserve opted for a move of 75 basis points.
The BoE’s sixth straight hike comes after the UK’s annual inflation rate hit a 40-year high of 9.4% in June – and is set to rise further in the months ahead.
The Monetary Policy Committee voted by an 8-1 majority to raise the bank rate by 0.5 percentage points. One member preferred to increase the bank rate by 0.25 percentage point to 1.5%.
Policymakers have also outlined a program of bond sales which could begin after the September policy meeting and could see the central bank start with sales of around £10bn per quarter.
Going forward, the Bank “will take the necessary steps to bring inflation down to 2 [percent] aiming sustainably in the medium term,” he said, adding that the policy is not on a predefined path.
“The magnitude, pace and timing of any further changes to the Bank Rate will reflect the committee’s assessment of the economic outlook and inflationary pressures,” he noted. “The Committee will be particularly attentive to indications of more persistent inflationary pressures and will act forcefully in response if necessary.”