The Bank of England raised its main interest rate today to 4.25 per cent, in line with market expectations. Independent economists had almost universally forecast the rate rise, the third since November, and had had their expectations reinforced by recent comments from members of the Bank's monetary policy committee (MPC).
In its statement accompanying the decision, the MPC said: "With a small and diminishing margin of spare capacity, inflationary pressures are likely to build despite a higher level of sterling than at the beginning of the year. Against that background, the Committee judged that an increase of 0.25 percentage points in the repo rate to 4.25 per cent was necessary to keep CPI inflation on track to meet the target in the medium term."
Inflation is currently well below target. It was at 1.1 per cent in March, and may yet fall further. Growth in the first quarter was disappointingly slow at 0.6 per cent, according to the initial official estimates...
