By Salma El-Sakka
The Bank of England has raised its base interest rate to 4% from 3.75%, the first increase in more than three years, as policymakers warn that further hikes are likely if the conflict involving Iran persists.
The Monetary Policy Committee voted unanimously for the 0.25 percentage point rise at its latest meeting, though member Catherine Mann favored a larger 0.5 point increase. The committee cited rising inflationary pressure driven by higher global energy and fuel prices resulting from the ongoing US and Israel conflict with Iran.
Governor Andrew Bailey said the increase was warranted due to inflationary pressure in the pipeline from energy prices. He cautioned that today's move should not be seen as the start of an inevitable long sequence of hikes, but unless the Middle East conflict is resolved, it is unlikely to be the last increase.
The MPC noted that many companies have so far absorbed higher energy costs or hedged against spikes since the war began about nine months ago. However, it warned that such buffers are temporary and cost pressures will eventually pass through to consumer prices if the energy shock persists, potentially raising prices for food, drink and other goods.
