Bank of England: British central bank raises interest rates for the first time in three years – to 4.0 percent

London. The Bank of England (BoE) raised its key interest rate for the first time in three years on Thursday. The Monetary Policy Committee raised the interest rate by 25 basis points to four percent. The decision was made with a clear majority of eight votes to one.

Catherine Mann, external member of the Monetary Policy Committee, was the only dissenting vote: she had called for a larger increase of 50 basis points to 4.25 percent. According to the BoE, whether further interest rate steps follow depends on the development of energy prices and inflation. Central Bank chief Andrew Bailey sees arguments for a further increase if inflation risks persist.

The BoE is following what the European Central Bank (ECB), the US Federal Reserve (Fed) and the Bank of Japan had already done. The financial markets hardly reacted to the interest rate increase because it was widely expected and already priced into the prices. The British pound rose slightly.

The higher interest rates are likely to make the British currency even more attractive for investors. Against a basket of foreign currencies, the pound has reached its highest level in recent weeks since the Brexit referendum a decade ago. Currently a pound costs around 1.35 dollars and 1.20 euros.