The Bank of England on Thursday matched the U.S. Federal Reserve by hiking interest rates by a quarter percentage point.
The 7-2 decision, the eleventh consecutive increase, brings the U.K. base rate to 4.25%, and comes after data showed inflation surprisingly accelerated in February to a year-over-year rate of 10.4%.
“Headline CPI inflation had surprised significantly on the upside and the near-term path of GDP was likely to be somewhat stronger than expected previously,” the Bank of England said in the simultaneously published minutes of the meeting. “The members put some weight on the possibility that the stronger domestic and global outlook for demand was also being driven by factors over and above the weaker path of energy prices, given that the strengthening had at least in part preceded the falls in prices.”
“If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required,” the central bank said.
The central bank did discuss the banking sector, and the failure of the U.S.’s Silicon Valley Bank and the run-up to UBS’s
UBS,
purchase of Credit Suisse
CS,
SVB’s U.K. subsidiary was bought by HSBC for £1.
The central bank’s financial policy committee said the U.K. banking system maintains robust capital and strong liquidity positions and can “continue supporting the economy” even as interest rates rise.
The pound
GBPUSD,
traded over $1.23 after the decision. The yield on the 2-year gilt
TMBMKGB-02Y,
however slipped 7 basis points to 3.42%, after a big rise on Wednesday when the inflation data came out.