Bank of England hikes interest rates, highest in last 15 years

The Bank of England has raised borrowing costs for the 13th time in a row to combat stubbornly high inflation, which has failed to come down from its peak as quickly as expected.

In a statement on Thursday, the bank said its nine-member Monetary Policy Committee decided to lift its main interest rate by half a percentage point to a fresh 15-year high of 5 per cent.

The decision was somewhat of a surprise, with most economists predicting a smaller quarter-point hike.

But figures on Wednesday showed UK inflation unexpectedly holding steady at 8.7 per cent, fuelling concerns over the outlook for prices. There had been predictions for a modest decline to 8.4 per cent.

The rate hike will pile further pressure on borrowers, particularly the 1.4 million or so households in the UK that will have to refinance their mortgages over the rest of the year.

It comes on a busy day for central bank action in Europe, including rate decisions from Turkey, Switzerland and Norway.

Central banks around the world, from the US Federal Reserve to European Central Bank, have rapidly raised interest rates to bring down inflation first stoked by supply chain backups tied to the rebound from the pandemic and then Russia's invasion of Ukraine.

UK's main stock indexes dropped on Thursday following the increase in interest rates.