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| Version 4 | Version 5 |
|---|---|
| Shock as UK rates rise to 5.25% | Shock as UK rates rise to 5.25% |
| (10 minutes later) | |
| The Bank of England has raised UK interest rates to 5.25% from 5% in an effort to curb inflation. | |
| Analysts had been anticipating a rate rise in the near future, although they expected policymakers to wait until next month to take action. | Analysts had been anticipating a rate rise in the near future, although they expected policymakers to wait until next month to take action. |
| Consumer price inflation has recently risen to 2.7%, the highest level in more than a decade. | Consumer price inflation has recently risen to 2.7%, the highest level in more than a decade. |
| Policymakers increased the cost of borrowing twice last year in an effort to stem inflationary pressures. | Policymakers increased the cost of borrowing twice last year in an effort to stem inflationary pressures. |
| The news will come as an unwelcome surprise to many homeowners. It will add £16 to the monthly payments of those with a £100,000 repayment mortgage. | |
| But the rise will be welcomed by savers if banks and building societies pass on the increase to their savings rates. | But the rise will be welcomed by savers if banks and building societies pass on the increase to their savings rates. |
| 'Surprise' | 'Surprise' |
| In a statement announcing its decision, the Bank of England said it expected consumer inflation to rise further in the near future. | In a statement announcing its decision, the Bank of England said it expected consumer inflation to rise further in the near future. |
| Inflation is already well above the government's 2% target and some analysts believe it will exceed 3% when the latest figures are published this month. | Inflation is already well above the government's 2% target and some analysts believe it will exceed 3% when the latest figures are published this month. |
| "The timing is a surprise," said Ross Walker, UK economist with the Royal Bank of Scotland. | "The timing is a surprise," said Ross Walker, UK economist with the Royal Bank of Scotland. |
| "What this perhaps tells us is that we have a nasty inflation number coming next week and they wanted to act pre-emptively." | "What this perhaps tells us is that we have a nasty inflation number coming next week and they wanted to act pre-emptively." |
| Employer groups expressed disappointment at the move, saying it could harm already struggling businesses. | Employer groups expressed disappointment at the move, saying it could harm already struggling businesses. |
| "If part of the intention was to dampen wage increases, it is doubtful a rate rise will have the desired effect," said Ian McCafferty, the CBI's chief economic adviser. | "If part of the intention was to dampen wage increases, it is doubtful a rate rise will have the desired effect," said Ian McCafferty, the CBI's chief economic adviser. |
| Shares fall | Shares fall |
| The FTSE 100 fell on the news amid concerns that the rate rise could constrain companies' growth and slow the housing market. | The FTSE 100 fell on the news amid concerns that the rate rise could constrain companies' growth and slow the housing market. |
| The MPC could have afforded to wait until trends in the labour market became clearer More reaction to the rate rise | The MPC could have afforded to wait until trends in the labour market became clearer More reaction to the rate rise |
| The Bank of England has, in the past, announced rate rises in the same month as it published quarterly inflation figures but this time decided to make its move earlier. | The Bank of England has, in the past, announced rate rises in the same month as it published quarterly inflation figures but this time decided to make its move earlier. |
| The Institute of Directors described the move as "tough but wise". | The Institute of Directors described the move as "tough but wise". |
| "Inflation is well above target," said Graeme Leach, its chief economist. "The Bank of England's pre-emptive strike looks sensible." | "Inflation is well above target," said Graeme Leach, its chief economist. "The Bank of England's pre-emptive strike looks sensible." |
| In a separate move, the European Central Bank held its main eurozone base rate at 3.5%. | |