Bank of England announces bumper half point rate rise

The Bank of England has opted to increase the base rate by 0.5% at its monthly meeting of the Monetary Policy Committee, marking the 13^th consecutive interest rate rise.

Announcing the historic half point increase, the Bank said it was taking action to counter “significant upside news in recent data that indicates more persistence in the inflation process, against the background of a tight labour market and continued resilience in demand.”

The rise brings the Bank of England base rate to 5%, it’s highest level since before the global financial crisis in July 2008.

Chancellor Jeremy Hunt said in response that the government’s resolve to tackle inflation was “watertight”, “because it is the only long-term way to relieve pressure on families with mortgages.

“If we don’t act now, it will be worse later”.

Share prices in leading listed housebuilders dropped around 2% on the news, following similar falls yesterday, with fears intensifying over the economic damage likely from sustained high interest rates.

Capital Economics has warned of a 25% drop in housing transactions this year, while a Treasury advisor has said that a recession will be necessary in order to bring inflation under control.

Anna Leach, deputy chief economist at business lobby group the CBI, said: “The Bank of England had no choice but to go for a bumper rate rise given that inflation had surprised on the upside for the fourth occasion. The sharper increase will come as a blow to hard-pressed households and businesses who are struggling with rising costs.

“With further rises likely from the Monetary Policy Committee this summer, the squeeze on firms and households is set to intensify as they grapple with the highest borrowing costs in 15 years.”