Bank of England hikes interest rates for 14th time in a row

The Bank of England has hiked interest rates again in yet another bid to get inflation under control.

It warned of “crystallising” risks which were pushing inflation upwards as it decided to increase its base rate to 5.25% from 5% - marking the 14th rate increase in a row.

But in a good sign for the Prime Minister, the Bank said it expects the Government to meet its promise to halve inflation by the end of the year.

The Consumer Prices Index will probably fall below 5% in the final quarter of 2023, it said.

Andrew Bailey, Bank Governor, said: "Inflation is falling and that’s good news.

"We know that inflation hits the least well off the hardest and we need to make absolutely sure that it falls all the way back to the 2% target. That’s why we’ve raised rates to 5.25% today."

However, in an unusual three-way disagreement, two members of the Bank’s decision-making Monetary Policy Committee (MPC) voted to hike the rate further, while one wanted to keep it unchanged.

The Monetary Policy Committee voted by a majority of 6-3 to raise #BankRate to 5.25%. Find out more in our #MonetaryPolicyReport: https://t.co/fGooUBPP4w pic.twitter.com/ch5hQ2xQ6u

— Bank of England (@bankofengland) August 3, 2023

The economy had shown "surprising resilience" over several quarters, and the Bank forecast today that the UK looked set to avoid a recession.

It said that gross domestic product (GDP) is expected to remain sluggish for many years to come.

The Bank added that GDP will rise 0.5% this year, an increase from the 0.25% increase it had previously forecast. But it downgraded its forecast for 2024 from 0.75% to 0.5% and for 2025 from 0.75% to 0.25%.

We expect inflation to fall further this year, to around 5%, and meet our 2% target by early 2025. https://t.co/fGooUBPP4w #MonetaryPolicyReport #inflation pic.twitter.com/5kWJc5qD0i

— Bank of England (@bankofengland) August 3, 2023

It said that its interest rates were “weighing on economic activity", sharing that it would if necessary keep the rate higher for longer to try to get inflation down.