The Bank of England (BoE) raised its benchmark interest rate on Thursday by half a percentage point to 4 percent, its highest level since autumn 2008.
At its meeting on Wednesday, the BoE's Monetary Policy Committee (MPC) voted in favor of the increase by a majority of 7-2, the bank said in a statement.
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This is the tenth consecutive rate hike since December 2021 as the BoE continues its fight against inflation, which slowed to 10.5 percent in December 2022 from a 41-year high of 11.1 percent in October.
"Global consumer price inflation remains high, although it is likely to have peaked across many advanced economies, including in the United Kingdom (UK)," the BoE said, adding that domestic inflationary pressures have been firmer than expected.
The country's current double-digit inflation is still far above the BoE's 2 percent target.
Acknowledging that the country's headline or consumer price index (CPI) inflation has begun to edge back and is likely to fall sharply over the rest of the year, the BoE still warned about risks of greater persistence in underlying inflation due to the tight labor market and strong domestic price and wage pressures.
The BoE expects the UK's CPI to fall to around 4 percent towards the end of 2023, "alongside a much shallower projected decline in output than in the November report forecast."
The BoE expects gross domestic product (GDP) to "fall slightly throughout 2023 and the first quarter of 2024, as still-high energy prices and the path of market interest rates weigh on spending."
The bank said the MPC will continue to "monitor closely indications of persistent inflationary pressures" and adjust the bank rate if necessary.