Bank of England takes interest rates to a 14-year high

After yesterday’s fourth consecutive 0.75 percentage point interest rate rise from the Federal Reserve, the Bank of England has finally decided to follow suit. This afternoon the BoE announced a rate hike of 0.75 points too, the first rise of this size in 33 years. This takes UK interest rates from 2.25 per cent up to 3 per cent – a 14-year high.

A 0.75 per cent increase had been expected by markets – the broad consensus of what the Bank would do after a tumultuous month of interventions, spikes in borrowing costs and inflation returning to double digits. There was general consensus on the Monetary Policy Committee, too, with a vote of 7-2 for the 0.75 percentage point increase (the other two votes were for a softer rise). Still, the pound fell 2p against the dollar less than an hour after the announcement – it’s clear the MPC are rather hesitant to be moving at this pace, leading to suspicion that future hikes may not be so bold.