The Bank of England has increased interest rates by a quarter of a percentage point to 4.25 per cent, despite the turmoil that has engulfed banking in recent weeks.
The rise, which was in line with economists’ forecasts, comes a day after the latest data showed that the annual rate of inflation jumped from 10.1 per cent to 10.4 per cent in February.
It is the 11th consecutive increase from the Bank of England, which started raising rates in December 2021.
The BoE said it judged UK banks to be “resilient” and “well placed to continue supporting the economy in a wide range of economic scenarios, including in a period of higher interest rates”.
The monetary policy committee also pointed to an improved outlook for both economic growth and inflation since its last meeting in February.
Seven of its nine members voted for the increase, arguing that the country’s stronger outlook for GDP and employment could “reinforce the persistence of higher costs in consumer prices”.
But the BoE said it would “monitor closely” any effect market tensions might have on the credit conditions faced by households and businesses.
Both the European Central Bank and US Federal Reserve have raised interest rates in the last week, despite the turmoil in the banking sector, which was partly set off by tighter monetary policy.
The pound edged higher against the dollar after the BoE announcement, extending earlier gains to trade 0.5 per cent higher on the day at $1.2323.
Gilt yields also moved marginally higher, with the interest rate sensitive two-year yield rising by 0.02 percentage points to 3.38 per cent.