With energy pushing UK inflation towards 5 percent, the Bank of England lifts its key rate by a quarter point
Governor Andrew Bailey does not rule out further moves for as long as the conflict in the Middle East drags on.
The Bank of England raised its base rate by 0.25 percentage points to 4 percent on Thursday, its first increase in more than three years, the BBC reports. Inflation currently stands at 3.5 percent, well above the 2 percent target, and the central bank expects it to climb to about 5 percent by mid-2027.
According to the Bank of England, the conflict in the Middle East has disrupted energy supplies and pushed up fuel and utility bills. There is little sign yet of knock-on effects on other prices and wages, but the bank expects them because energy costs have been high for a long time. The British economy has also proved more resilient than expected, which increases that risk.
Governor Andrew Bailey said the move is not the start of a long series of increases, but is also unlikely to be the last as long as the conflict is not resolved. Borrowers on variable-rate mortgages will pay more, while savers can expect better returns, the BBC writes. Chancellor John Healey said the government wants to give families and businesses breathing space, while the Conservatives are calling for lower taxes and less spending. The next decision is due on 17 December.