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© Reuters Bank of England hikes interest rate to 5%, 13th rise in a row
Proactive Investors - The Bank of England's monetary policy committee (MPC) hiked interest rates half a point to 5.0%.
It was the 13th rate rise in a row as policymakers look to get a grip on inflation that has remained stubbornly high.
The MPC voted by a majority of 7–2 to increase rate to 5%, with two members preferred to maintain bank rate at 4.5%, as in the previous meeting.
It followed yesterday's inflation figures delivered unwanted surprises, with the consumer price index remaining at 8.7% and core CPI rising to a 31-year high of 7.1%.
The UK base rate is currently 4.5% after the MPC hiked by a quarter of a percentage point at the meeting in May.
A rise to 4.75% had been widely expected before the CPI release, but some economists are now predicting a move to 5.0% today, with odds on further hikes also moving as a result of the stubborn inflation figures.
"It's difficult to stress just how bad that UK release was yesterday," said economist Jim Reid at Deutsche Bank (ETR:DBKGn), noting that both headline and core CPI surprised on the upside for a four consecutive month, leaving the UK an outlier with the highest inflation in the G7 by some margin.
In recent weeks, markets started to fully price in a move to 6% bank rate over the coming months from BoE boss Andrew Bailey and his colleagues, returning to the levels seen after the 'mini budget' turmoil last September.
On Thursday morning markets were pricing a 37% chance of a hike to 5.0% later in the day.
"But looking over the June and August meetings together, we’ve got 76bps of rate hikes priced, so that implies markets are fully pricing in a larger move for one of the next two decisions," said Reid,
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