The Bank of England voted for a surprise increase in interest rates to 0.25% on Thursday to rein in rising prices.
The BoE’s monetary policy voted 8-1 for rates to rise from their record low of 0.1%. The MPC voted unanimously to stick to its targets for buying bonds.
The MPC judged that a rate rise was needed to start bringing inflation back to the BoE’s target of 2% from 5.1% now, the meeting minutes said. Economists had expected the BoE to leave rates on hold because of rising uncertainty about the Omicron variant of Covid-19.
“Although the Omicron variant is likely to weigh on near-term activity, its impact on medium-term inflationary pressures is unclear at this stage,” the minutes said.
Inflation is at a decade high and unemployment has fallen despite the end of furlough support. The MPC judged that these conditions meant it was time to start tightening monetary policy despite signs the economy was slowing.
UK economic activity slowed sharply in December as growing uncertainty caused a sharp drop in services and a dip in the manufacturing purchasing managers’ index, a report showed on Thursday. The BoE’s rate setters saw the gloomy report before voting.
