The Bank of England has raised interest rates by 25 basis points, taking the Base Rate to 5.25%, its highest level since 2008.
The increase is the 14th in a row and was broadly expected, as authorities battle to bring inflation closer to the Bank’s 2% target.
The consumer prices index (CPI) fell last month, but remained well above most industrial nations at 7.9% and almost four times the Bank’s target.
The Bank's Monetary Policy Committee (MPC) was split 6-3 on the decision with two members, Jonathan Haskel and Catherine Mann, preferring to increase the Bank Rate by 0.5 percentage points, to 5.5%, and one member, Swati Dhingra, preferring to maintain the Bank Rate at 5%.
Despite the recent fall in inflation, the MPC said it continues to judge that risks around inflation are skewed to the upside, albeit by less than in May.
But CPI inflation is expected to fall to around 5% by the end of the year, due to lower energy costs, and to a lesser degree, food and core goods price inflation. Services price inflation, however, is projected to remain elevated at levels close to its current rate in the near term.
The Bank then thinks inflation will hit its 2% target in the second quarter of 2025.
The Bank expects the UK to avoid a recession but sees the economy effectively flatlining with 3 years of near-zero growth.