Investing.com - The Bank of England raised interest rates Thursday, in what was widely anticipated decision, despite deepening worries over Brexit and indicated that any more hikes will be at a gradual pace.
The BoE’s Monetary Policy Committee voted unanimously to raise rates by a quarter of a percentage point to 0.75%. It the highest level since March 2009.
The BoE noted that “any future increases in Bank Rate are likely to be at a gradual pace and to a limited extent.”
The bank said it raised interest rates because the economy has recovered from its slowdown at the start of the year and noted that despite still slow growth in the UK economy inflation is rising at a faster pace than its targeted rate.
The annual rate of inflation is currently running at 2.4%, slightly above the BoE’s target of 2% after falling back from its peak of 3.1% in November.
Recent data has indicated that the UK economy is showing signs of recovery after growth slowed to near stagnation at the start of the year, while the labor market remains resilient, even though wage growth is moderate.
The decision comes at a time of growing concerns over a lack of clarity on the terms under which the UK will exit the European Union in March of next year.
The BoE warned that Brexit could damage the economic recovery.
"The MPC continues to recognise that the economic outlook could be influenced significantly by the response of households, businesses and financial markets to developments related to the process of EU withdrawal," the rate statement said.
It was only the second rate hike in a decade after the BoE last raised interest rates in November, reversing a rate cut imposed after the Brexit vote in 2016.
Sterling pared back losses after the decision, with GBP/USD at 1.3098 by 07:16 AM ET (11:16 AM GMT), off an earlier low of 1.3076, while EUR/GBP was at 0.8867, from around 0.8888 ahead of the announcement.