Bank of England raises rates again as inflation persists

The Bank of England raised interest rates a quarter-point Thursday, its 11th consecutive rate increase, a day after data showed that Britain’s inflation rate unexpectedly increased last month, providing an unwelcome setback in the central bank’s struggle against rapidly rising prices.

The bank acted amid heightened tension for central banks after turmoil in the U.S. and Swiss banking systems spurred global central bankers into protective moves to shore up financial stability. On Thursday, the Bank of England affirmed that Britain’s banking system was “resilient” and able to withstand a period of higher interest rates, according to the minutes of this week’s policy meeting.

The market woes also have created the sense that policymakers on both sides of the Atlantic are battling two opposing risks: that inflation will remain persistent and need to be tackled with higher interest rates, and that higher rates will worsen the turmoil in banking.

But over the past week, central bankers have persevered with raising interest rates and emphasized other tools that can be used to maintain financial stability.

The European Central Bank raised rates half a percentage point last week, and on Wednesday the Federal Reserve raised rates a quarter-point and implied it would carry out just one more rate increase this year. Earlier Thursday, the Swiss National Bank, the country’s central bank, raised interest rates half a point, to 1.5%.

Since December 2021, the Bank of England’s policymakers have raised interest rates to 4.25%, from near zero, to stamp out high inflation.

Consumer prices rose 10.4% in February from a year earlier, up from 10.1% the month before, ending a three-month downward trend and stubbornly keeping inflation in the double digits, according to data published Wednesday. The central bank had forecast that the inflation rate would fall to 9.9%.

Previously, the bank had shifted its tone to indicate that future interest rate increases were not a given. Last month, policymakers said they would respond to signs of inflation’s being more persistent than they expected, leading analysts to predict the bank was close to halting rate increases.

Policymakers stuck to their message this week. “If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required,” the minutes said.