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The Bank's Monetary Policy Committee (MPC) decided to raise the interest rate from 4% to 4.25% (John Walton/PA) The Bank of England raised interest rates for the 11th time in a row following an unexpected spike in inflation in the UK.
The Bank's Monetary Policy Committee (MPC) decided to raise interest rates by 4% to 4.25%, just one day after the US Federal Reserve raised its overnight interest rate in a quarter percentage point.
At its meeting yesterday, the MPC voted 7-2 in favor of raising the rate by 0.25 percentage points. Two members wanted the Bank to maintain the previous rate of 4%.
The Bank of England faced a difficult balancing act, weighing the need to rein in inflation with concerns about banking problems and the possibility that it would start to tighten lending.
Wall Street shares fell sharply overnight on the Fed's decision and comments suggesting it does not expect to cut rates anytime soon, underscoring the fragility of stock market confidence.
This follows an unexpected jump in consumer price index inflation, from 10.1% in January to 10.4% in February, which economists say would make it more difficult for the Bank to justify suspending its protracted rate hike cycle. .
Rising rates will put even more pressure on borrowers, already pressured by the cost-of-living crisis.
Craig Erlam, senior market analyst at Oanda, said: "Whatever flexibility the Bank of England might have thought it would have on Thursday was wiped out by the inflation data on Wednesday morning."
He added that there was "nothing to justify a pause" in raising interest rates, "even amid financial stability concerns and the ripple effect of aggressive rate hikes."
It follows the collapse of Silicon Valley Bank in the US and the landmark acquisition of Credit Suisse, both events that sent shockwaves through financial markets and raised fears of a global banking crisis.
He also raised the question of whether higher interest rates are putting too much pressure on small lenders, who could buckle under the weight of investment losses.
PA wire
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