The Bank of England decided to raise interest rates by a quarter of a percentage point on Thursday and said it expected Britain's inflation to pick up faster than before, despite a sharp rise in price growth announced on Wednesday.
Sounding more confident about the country's slowing economic outlook, the BoE's nine rate-setters voted 7-2 in favor of a 25-basis-point increase in Bank Rate to 4.25%, as expected in a Reuters poll.
This was the 11th consecutive increase in borrowing costs, starting in December 2021, but it was the smallest increase since June last year.
Monetary Policy Committee members Swati Dhingra and Silvana Tenreyro voted to keep rates on hold while Catherine Mann, who has been a strong advocate for the MPC to raise rates in larger steps, supported a relatively small 25 basis point hike.
The BoE, which is trying to reconcile a weak economic outlook and concerns about global banks with very high inflation, decided not to change its message that the MPC saw no need for immediate action on keeping rates.
"The MPC will continue to closely monitor indicators of ongoing inflationary pressures, including tight labor market conditions and the behavior of wage growth and services inflation," the BoE said.
Sterling strengthened slightly against the US dollar and euro while British government bond prices were little changed after the announcement. Investors in the futures market expect another 25 basis point move by the BoE, putting a roughly 50% chance on a quarter-point increase.
In a statement on Thursday, the BoE said price growth remained on track to fall sharply in the April-June period this year, despite inflation surging to 10.4% in February.
