The Bank of England on Thursday surprised markets with a 50 basis point hike to interest rates, its 13th consecutive increase.
, unchanged from the previous month, cementing market expectations that the MPC would opt for another hike. Economists also upped their expectations for further monetary tightening in the future.
Most worryingly for the central bank, core inflation — which excludes volatile energy, food, alcohol and tobacco prices — was 7.1% year-on-year in May, up from 6.8% in April and marking its highest rate since March 1992. "There has been significant upside news in recent data that indicates more persistence in the inflation process, against the background of a tight labour market and continued resilience in demand," the MPC said in its summary Thursday.
"The MPC will continue to monitor closely indications of persistent inflationary pressures in the economy as a whole, including the tightness of labour market conditions and the behaviour of wage growth and services price inflation. If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required."sufficiently to quell inflationary pressures without triggering a full-scale mortgage crisis and recession.
The MPC said that the high number of fixed-rate mortgages means that the full impact of the increase in the Bank Rate so far "will not be felt for some time."
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