A passageway near the Bank of England (BOE) in the City of London, U.K., on Thursday, March 18, 2021.
Hollie Adams | Bloomberg | Getty Images
LONDON — The Bank of England on Thursday hiked interest rates by 25 basis points and upgraded its projections for the U.K. economy.
The Monetary Policy Committee voted 7-2 in favor of the quarter-point hike to take the main Bank rate from 4.25% to 4.5%, as the Bank reiterated its commitment to taming stubbornly high inflation.
The headline consumer price index (CPI) rose by an annual 10.1% in March, driven by persistently high food and energy bills. Core inflation, which excludes volatile food, energy, alcohol and tobacco prices, rose by 5.7% over the 12 months to March, unchanged from February’s annual climb and reiterating the risk of entrenchment that the Bank is concerned about.
In its accompanying Monetary Policy Report, the MPC also updated its growth and inflation forecasts, and no longer expects the U.K. economy to enter recession this year.
The economy has thus far shown surprising resilience in fending off a widely-anticipated recession, with falling energy costs and a fiscal boost announced in the government’s Spring Budget improving the outlook.