London: The Bank of England raised its key interest rate by a quarter-point to 5.75% on 5 July, the highest level for more than six years, in a bid to dampen inflationary pressures in the British economy.
The BoE’s decision to hike the cost of borrowing for the fifth time since August 2006 had been widely anticipated by economists, after recent data revealed that Britain’s economy had grown faster than expected during the first quarter.
“The Bank of England’s Monetary Policy Committee (MPC) today voted to raise the official Bank Rate paid on commercial bank reserves by 0.25 percentage points to 5.75%,” the BoE said in a statement at the conclusion of a two-day meeting.
Although the BoE noted that British 12-month inflation had fallen closer to its 2.0% target in May, it said that “most indicators of pricing pressure remain elevated.”
The central bank had last increased British borrowing costs in May, to 5.50%.
Following July’s meeting, the BoE said: “The Committee judged that, relative to the 2.0% target, the balance of risks to the outlook for inflation in the medium term continued to lie to the upside.
“Against that background, it further judged that an increase ... was necessary.”