The Bank of England (BoE) has increased the base interest rate to 4.5% following a meeting on monetary policy on Thursday (10 May).
The Bank's monetary policy committee (MPC) voted to raise the rate by a majority of seven to two, marking the 12th consecutive increase since December 2021.
According to the Bank, inflation will fall quickly in 2023 and hit the Government's 2% target as 2024 draws to a close. However, the MPC said there might be further rate increases this year as the price of food and core goods are falling slower than expected.
Higher interest rates mean that many individuals and businesses will face higher borrowing costs.
The BoE acknowledged this can "make things harder" for many people struggling with the cost of living crisis but said that the move was necessary to ease inflation:
"Low and stable inflation is vital so that money keeps its value and people can plan for the future with confidence. It's fundamental for a healthy economy."
Despite recent inflationary pressures, the UK's economic outlook is generally positive, with the Bank expecting GDP to "grow modestly" this year.
The MPC will make its next interest rate decision on 22 June 2023.
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