UK interest rates raised to 1.25% by Bank of England

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The Bank of England is trying to stem the rise in prices.

The rates have increased five times in a row, pushing them to the highest level in over a decade.

As the cost of living increases, finances are being squeezed.

The rate of inflation is currently at a 40-year high of 9%, and Bank warned it could surpass 11% later this year.

If inflation continues, the Bank said it would act forcefully.

Six of the nine members of the Bank's Monetary Policy Committee voted to raise rates, but three voted for a bigger increase.

The minutes from the Bank's meeting show that they expect the UK economy to shrink in the second quarter.

The Bank has said that it expects GDP to grow between July and September. This would mean that the UK wouldn't be in a recession this year.

The price cap on household energy bills is set to be increased in the final three months of this year, and the Bank expects the economy to shrink.

The increase in the cost of living will be slightly above the rate of inflation in October, the Bank said.

The rate of inflation will be five times the Bank's target.

Andrew Bailey, the Bank's governor, said in a letter that inflation was largely due to rising prices for energy and agricultural goods, which have worsened as a result of Russia's war with Ukraine.

The Bank of England expects the economy to fall in this quarter and inflation to go up in the autumn when the energy cap is reset. New forecasts will be fleshed out in August.

The rise in interest rates is meant to stop the global energy price shock in the UK. The Bank's spies don't see any sign of a decline in demand for labour. The rise to a rate that would still be considered low by historic standards, but may prove rather high to an economy, is something that homeowners and businesses have become accustomed to.

The Bank replaced guidance that more rates are on the way with an assurance that it will respond "forcefully" to any signs that inflation is continuing. Three members of the nine member committee voted for a bigger rise in rates, in the wake of the 0.75% rise in rates in the USA overnight. The Bank pointed out that core inflation, which excludes volatile energy prices, is higher in the UK than in the euro area.

The Bank is not closing the door on further rises. Some economists think that some of the rises could be reversed within a year. There is a lot of uncertainty at the moment.