The Bank of England has raised interest rates for the fifth time in a row to 1.25 per cent.
In its meeting today, the Monetary Policy Committee voted 6-3 to raise the rate by 0.25 percentage points.
The three dissenters voted to raise them by 0.5 percentage points.
In the minutes of the meeting, the MPS said though there has been "little news" in global and domestic economic data since the May report, there have been "significant" movements in financial markets.
The committee highlighted the weaker than expected level of GDP growth in April, and bank staff now expect that measure to fall by 0.3 per cent in the second quarter as a whole.
Although consumer confidence has fallen further, it said, other indicators of household spending appear to have held up.
The labour market continues to be tight, the report said, with unemployment at 3.8 per cent in April, with elevated recruitment difficulties and strong labour demands.
CPI inflation is expected to be more than 9 per cent during the next few months and to rise to slightly above 11 per cent in October.
The MPC said initial analysis of the recent cost of living support package suggests that it could boost GDP by 0.3 per cent and raise inflation 0.1 percentage points.
Jonny Black, strategic director at Abrdn, said: “On top of supporting on savings and investment strategies, advisers have a key role to play in explaining what the highest interest rates since 2009 mean to clients in basic terms, including why it’s happening, what could happen next and where it sits in a wider economic and historical picture.
“Clients will naturally have concerns. And, for some, this could be the first time that they’ve been exposed to anything other than record low rates, while having access to a professional they can speak to about it. The ability to speak to a trusted adviser to get the context behind headlines will give them confidence, and re-assurance alongside the practical guidance they need to protect their financial interests.”
US hikes
Yesterday (June 15), the Federal Reserve raised benchmark rates by 0.75 percentage points, saying a further hike of similar proportions was possible at its next meeting.
Developed economies have been struggling with soaring inflation since the end of the pandemic.
In the UK, inflation rose to a 40-year high in April.
The consumer prices index rose to 9 per cent in the 12 months to April this year, driven by high energy prices and transport costs, according to the Office for National Statistics.
RPI, which measures the changes in retail prices of a basket of goods and services, as opposed to the weighted average prices tracked by the CPI, rose 11.1 per cent, up from 9 per cent in March.
sally.hickey@ft.com
