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The Bank of England has hiked interest rates by 0.25 percent in its first such rise in more than a decade.\nThursday\u2019s rise brought the official interest rate to 0.5 percent — a level which existed before the June 2016 Brexit referendum.
\n\u201cThe [Monetary Policy Committee] now judges it appropriate to tighten modestly the stance of monetary policy in order to return inflation sustainably to target,\u201d the bank said in a statement.
\n\u201cAll members agree that any future increases in Bank Rate will be at a gradual pace and to a limited extent,\u201d it added, signaling further gradual rises in the future.
\nThe Consumer Price Index (CPI) was announced as 3 percent last month.
\n\u201cThe overshoot of inflation throughout the forecast predominantly reflects the effects on import prices of the referendum-related fall in sterling,\u201d the bank said.
\nIt explained its decision saying \u201cuncertainties associated with Brexit are weighing on domestic activity, which has slowed even as global growth has risen significantly\u201d.
\nIt also said Brexit-related constraints on investment and the labor supply appear to be \u201creinforcing the marked slowdown that has been increasingly evident in recent years in the rate at which the economy can grow without generating inflationary pressures\u201d.
\nMark Carney, the governor of the Bank of England, said in a news conference that with prices rising and spare capacity falling, inflation is \u201cunlikely to return to the two percent target\u201d without an increase in interest rates.
\n“But these are not normal times,” he said.
\nHe said Brexit will redefine the U.K.\u2019s relationship with Europe, and will have consequences on the movement of goods, services, people and capital, as well as the real incomes of households.<\/p>\n