The Bank of England has raised interest rates to their highest levels in almost 15 years.
Seven members of the Bank of England's Monetary Policy Committee voted to increase the base interest rate to 4.5 per cent from 4.25 per cent, reports. The remaining two members voted against the change, stating that inflation was expected to fall considerably this year without needing to raise the rate again.
The Bank of England has warned the increase in the cost of living is expected to fall more slowly than previously thought but the Government’s promise to halve inflation by the end of the year is still narrowly on track. The Bank said it expects Consumer Prices Index inflation to reach just over 5.1 per cent by the final quarter of this year.
Economists at the Bank have also released a record upgrade to its gross domestic product expectations. It is now expected that the GDP will be 2.25 percentage points higher at the end of its three-year forecast period than thought in February - the largest upgrade since 1997 when the Monetary Policy Committee was formed.
The Bank said it expects the banking crisis will reduce US GDP by around 0.25 percentage points but will have a much smaller impact in Europe.
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