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Bank increases UK rates to 5.25%

The Bank of England has raised interest rates by a quarter of a point to 5.25% in an effort to curb inflation.

Analysts had been anticipating a rate rise in the near future although they expected policymakers to wait until next month to take action. Consumer price inflation has recently risen to 2.7%, the highest level in more than a decade. Policymakers increased the cost of borrowing twice last year in an effort to stem inflationary pressures. In a statement announcing its decision, the Bank of England said it expected consumer inflation to rise further in the near future. Inflation is already well above the government's 2% target and some analysts believe it will exceed 3% when the latest figures are published this month. „The timing is a surprise," said Ross Walker, UK economist with the Royal Bank of Scotland. „What this perhaps tells us is that we have a nasty inflation number coming next week and they wanted to act pre-emptively.” Employer groups expressed disappointment at the move, saying it could harm already struggling businesses. „If part of the intention was to dampen wage increases, it is doubtful a rate rise will have the desired effect,” said Ian McCafferty, the CBI's chief economic adviser. (BBC NEWS)