Northern Ireland news

Bank of England has raised interest rates to 1.25% from 1%

The Bank of England has raised interest rates to 1.25% from 1%.

It is the first time since January 2009 that the rate has been higher than 1%.

The Bank of England’s monetary policy committee (MPC) of nine members voted six to three to increase rates to 1.25%.

The central bank said governor Andrew Bailey, Ben Broadbent, Jon Cunliffe, Huw Pill, Dave Ramsden and Silvana Tenreyro backed a quarter point rise, but that three members, Jonathan Haskel, Catherine Mann and Michael Saunders, voted for a larger increase, to 1.5%.

In minutes of the latest decision, the Bank said Consumer Prices Index (CPI) inflation is now expected to peak above 11% in October.

The Bank said: “CPI inflation is expected to be over 9% during the next few months and to rise to slightly above 11% in October.

“The increase in October reflects higher projected household energy prices following a prospective additional large increase in the Ofgem price cap.

“In the MPC’s latest forecasts in May, upward pressure on CPI inflation was expected to dissipate over time.

“In the main, this reflected the stabilisation of the prices of commodities, albeit at elevated levels, and other tradable goods.

“It also reflected the combined impact of weaker real incomes and tighter monetary policy on domestic demand. Monetary policy is also acting to ensure that longer-term inflation expectations are anchored at the 2% target.”

The pound lost early session gains after the rates announcement, which was in line with expectations, falling 0.1% to 1.21 US dollars and edging up 0.1% to 1.16 euros.

Sterling had been nearly 1% higher against both currencies before the decision.

The FTSE 100 Index also came off lows, but remained deep in the red, down 173.1 points or 2.4% at 7100.3, having earlier tumbled by more than 200 points at one stage.

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