Bank of England surprises with half-point hike

Article content

In a statement Thursday, the bank said its nine-member Monetary Policy Committee decided to lift its main interest rate by half a percentage point to a fresh 15-year high of 5 per cent.

Article content

The decision was somewhat of a surprise, with most economists predicting a smaller quarter-point hike.

But figures on Wednesday showed U.K. inflation unexpectedly holding steady at 8.7 per cent, fuelling concerns over the outlook for prices. There had been predictions for a modest decline to 8.4 per cent.

The rate hike will pile further pressure on borrowers, particularly the 1.4 million or so households in the U.K. that will have to refinance their mortgages over the rest of the year.

It comes on a busy day for central bank action in Europe, including rate decisions from Turkey, Switzerland and Norway.

Central banks around the world, from the U.S. Federal Reserve to the Bank of Canada, have rapidly raised interest rates to bring down inflation first stoked by supply chain backups tied to the rebound from the pandemic and then Russia’s invasion of Ukraine.