The Bank of England on Thursday raised its key interest rate by 0.25 percentage points, from 3.75% to 4%, its first increase in more than three years.
Eight of the nine members of the Monetary Policy Committee voted for the rise, while Catherine Mann preferred a larger move to 4.25%. The committee said the Middle East conflict was now in its ninth month and global energy prices had kept climbing. UK consumer price inflation rose to 3.5% in September and is expected to reach around 5% by the middle of next year.
Governor Andrew Bailey said the decision should not be seen as the first in an inevitable long sequence of hikes, but warned that unless the conflict in the Middle East is resolved, it did not seem likely to be the last. The move will make mortgages, loans and credit cards more expensive while improving returns for savers. The committee's next decision is due on December 17.