The central bank’s Monetary Policy Committee voted six to three to raise rates by 25 basis points, with the rest voting for a 50 basis points rise.
This move was widely expected, with most analysts believing another hike was necessary to combat soaring inflation, after hitting 9% in April.
With rates now at their highest since January 2009, the MPC said that it expected inflation to remain over 9% “during the next few months”, rising to above 11% in October.
Little has changed since the committee’s previous economic forecasts in May, according to the MPC report, although UK GDP has been “weaker than expected in April”, partially due to the sharp decline of the Test and Trace scheme.
Fed confirms aggressive inflation mandate with biggest interest rate hike since 1994
The UK is currently set to grow slower than any G20 economy except Russia, as fears of an impending recession continue to intensify.
Also analysed was the government’s recent “Cost of Living Support package”, finding that it expected the measures to “boost GDP by around 0.3% and raise CPI inflation by 0.1 percentage points in the first year, with some upside risks around these estimates given the targeted and front-loaded nature of some of the measures”.
This decision came following a hawkish move from the Federal Reserve yesterday evening to hike interest rates by 0.75%.
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