The Bank of England has been criticised after confounding expectations from the markets yesterday by holding interest rates at 0.1%.
However, it warned that inflation would raise more sharply than expected, reaching about 5% in April. The bank’s monetary policy committee said that it was likely to be necessary to increase rates “over coming months”.
Financial markets had been pricing in a 15-basis-point rise in the benchmark rate to 0.25%.
The surprise decision was not unanimous, with two of the nine committee members voting to lift rates to 0.25% immediately.
The decision by the MPC was criticised by some economists who believe the bank should act to tackle inflation.
Others asked why “speech after speech” had been used to nudge market expectations higher, if no raise was going to be made.
Governor Andrew Bailey has denied giving the market the wrong impression, saying he was not an “unreliable boyfriend”.
