London December 16 2021: Bank of England policymakers have voted to raise interest rates to 0.25% from the record low level of 0.1%.
The Bank has been caught between a surge in the cost of living – which is a reason to raise rates – and the rapid spread of the Omicron variant – which is an argument to keep them low.
Investors had been betting there was a 66% chance that the Bank would raise rates on Thursday, up from less than 50% before the inflation numbers for November came out on Wednesday.
The cost of living figures showed prices rising at their fastest rate for a decade.
The pound has jumped by almost a cent against the US dollar, as traders react to the surprise rise in UK interest rates. It’s hit $1.335, up 0.7% today, its highest in over two weeks, after hitting one-year lows earlier this month.
Most economists polled by Reuters had expected the BoE to keep Bank Rate at 0.1% due to a new surge in coronavirus cases. The BoE’s nine-member Monetary Policy Committee voted by 8-1 to raise Bank Rate to 0.25% from 0.1%.
The MPC also voted 9-0 to keep the BoE’s government bond-buying programme at its target size of 875 billion pounds ($1.16 trillion). The BoE has also bought 20 billion pounds of corporate bonds.
