BoE: Raises interest rates by 25 basis points to 1.25% (upd)

LAST UPDATE 14:20

The Bank of England raised interest rates by a further 25 basis points, but said it was ready to take action to offset the risks posed by inflation that has topped 11%.

A day after the US Federal Reserve raised interest rates to its highest level since 1994, the BoE maintained its most gradual approach as it warned that the British economy would shrink in April-June.

The nine-member monetary policy committee voted 6-3 in favor of the 1.25% increase, the same percentage as in May when some members voted in favor of a 50 basis point increase.

The British interest rate is at its highest level since January 2009. This is the fifth time BoE has raised borrowing costs since December, when it became the first bank to tighten its monetary policy since the pandemic began.

But some critics say it is moving too slowly to stem rising inflation from wage consolidation and inflation expectations from hurting the economy in the long run.

“The scale, pace and timing of further increases will reflect the Commission’s assessment of the economic outlook and inflationary pressures,” BoE said.

“The Commission will be vigilant for signs of more persistent inflationary pressures, and if necessary act vigorously in response.”

The BoE also dropped its estimates in May, when it said most members of the monetary policy committee believed that “a degree of further tightening of monetary policy may be appropriate in the coming months.”

Catherine Mann’s Jonathan Haskel Michael Saunders voted in favor of a 50 basis point increase, as they did in May.

The BoE noted that the course of the market for British interest rates had increased significantly since the May meeting, although there was relatively little news since then.