The Monetary Policy Committee has voted seven to two to take interest rates to 5 per cent, a 0.5 point increase. Its thirteenth rise in a row takes rates to their highest level in 15 years, and is being described as a ‘shock’ increase, brought in as a response to the rise in core inflation on the year in May, which has hit 7.1 per cent.
The horror of inflation is that it gobbles up your income and your savings
After this week’s dire inflation update, the question wasn’t whether the Monetary Policy Committee would raise interest rates, but by how much. After last week’s labour market update, which saw nominal wages rise at record speed (albeit below the rate of inflation – in real terms, wages are falling), it was expected that the MPC would opt for another 0.25 point increase, but since the inflation data was released, market expectation increased to 0.5.
As it turned out, no one on the committee voted for a 0.25
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