Interest rates increased to 3.5% by Bank of England in 14-year high to tackle inflation

The Bank of England has raised interest rates to 3.5% in a 14-year high in an attempt to get inflation under control.

The Bank's Monetary Policy Committee (MPC) once again voted to increase the Bank Rate, by 0.5 percentage points from 3% to 3.5%, marking a slowdown from the last rise in November when interest rates were increased by 0.75 percentage points. The MPC have raised the rates in every meeting held since late last year, in a bid to meet the target of getting inflation to 2%.

It comes as the Office for National Statistics (ONS) revealed on Wednesday that inflation was at 10.7%, having decreased from the 40-year high seen in October. The Committee said that the economy is expected to perform better in the final three months of the year than previously thought, with GDP forecast to fall by 0.1% as opposed to the previous prediction of a 0.3% drop.

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One member of the Committee voted to increase interest rates by 0.75%, while two other members argued that the rate should be kept at 3%, with a majority of 6-3 voting for the 0.5 percentage point rise overall.

People on variable mortgages and first-time buyers have been dealt another blow as interest rates rise again (Getty Images/iStockphoto)

A statement from the Bank of England said of the decision: "The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response.

"The majority of the Committee judges that, should the economy evolve broadly in line with the November Monetary Policy Report projections, further increases in Bank Rate may be required for a sustainable return of inflation to target.

"There are considerable uncertainties around the outlook. The Committee continues to judge that, if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary."

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