Reported by The Guardian
Base rate increases from 3.75% and Bank governor signals another rise in near future to combat rising inflation
Analysis: Interest rate rise in midst of cost of living crisis will leave many incredulous
The Bank of England has raised interest rates for the first time in three years and warned of another increase to combat inflationary pressure unleashed by the Iran war.
More from the original report
Eight members of the Bank’s monetary policy committee (MPC) voted for the rise, which takes the base rate from 3.75% to 4%. The ninth member, Catherine Mann, preferred a more dramatic half-point increase.
The Middle East conflict has pushed oil prices persistently above $100 a barrel in recent months, as hopes have evaporated of a deal that could reopen the strait of Hormuz .
As a result, the Bank now expects UK inflation to rise to 4.9% in the middle of next year – up from 3.2% in its last economic forecast in July. Inflation hit 3.5% in September , as measured on the consumer prices index.
The decision, which will hit mortgage borrowers, comes a week after John Healey used his first budget to promise “breathing space” for hard-pressed consumers. Echoing the Office for Budget Responsibility’s gloomy forecasts for living standards , the MPC expects real post-tax income to fall this year and next.
The Bank’s governor, Andrew Bailey , raised the prospect of another rate rise in the near future – with a resolution to the Iran conflict the key factor that will influence the decision.
“Without news which softens the risks to inflationary pressures, I can see the argument for a further increase in rates and thereafter taking a more conditional approach,” he said, according to the MPC minutes.
However, he played down the likelihood of a prolonged series of increases, as markets have been predicting. “Today’s increase shouldn’t be seen as the first in an inevitable long sequence in hikes. But unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase,” he said.
The Bank’s next interest rate decision will be announced on 17 December,…