Base rate of interest rises again to 0.5%

The Bank of England increased interest rates by to 0.5%, amid concerns that surging energy prices could push inflation to more than 7% by April 2022.

Judging inflationary pressures remained "well anchored", the monetary policy committee (MCP) voted by five to four to increase the bank rate by 0.25 percentage points, making it more expensive to borrow.

The four members who voted against the measure wanted to increase interest rates by 0.5 percentage points to 0.75%.

The Bank of England previously increased interest rates in December 2021 from 0.1% to 0.25%.

Inflation is expected to average close to 6% in 2022, in part driven by global supply chain issues.

Suren Thiru, head of economics at the British Chambers of Commerce, said:

"The Bank of England is seeking to dampen an inflationary surge it has little control over.

"Higher interest rates will do little to limit the soaring energy costs and persistent supply chain disruption that are driving the current spike in inflation."

Responding to similar concerns, governor of the Bank of England Andrew Bailey said the MCP was trying to counter "second round effects from the inflation shock" caused by businesses raising prices and workers asking for higher wages to deal with higher inflation.

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