The Bank of England has announced another increase in the Bank Rate after a surprise jump in inflation last month.
Interest rates were raised from 4% to 4.25% — the 11th hike in less than 18 months.
Monetary Policy Committee (MPC) members voted by a majority of 7-2 for an increase of 0.25 percentage points, with two members voting to maintain the rate at 4%.
The decision comes after new figures showed that UK inflation rose to 10.4% in the year to February, from 10.1% in January.
However, the Bank of England said that the economy is performing better than previously expected and it still expects inflation to fall sharply over the rest of the year.
In a change to its forecast, the Bank added that it no longer believes the UK is heading into recession. GDP is now expected to grow slightly in the coming months, instead of shrinking as previously anticipated.
Amid recent turmoil in global financial markets, in particular since the failure of Silicon Valley Bank and in the run-up to UBS’s acquisition of Credit Suisse, members of the Bank’s Financial Policy Committee (FPC) expressed confidence in the resilience of the UK banking system.
It judged that “the UK banking system maintains robust capital and strong liquidity positions, and is well placed to continue supporting the economy in a wide range of economic scenarios, including in a period of higher interest rates”.
