03.08.2006

Interest rates up...

Both the Bank of England and the ECB raised their interest rates today, both sterling and euro rates were hiked up a quarter percent.

The Bank of England unexpectedly raised its key interest rate by a quarter point to 4.75 percent today, taking back a quarter-point cut it made a year ago.

With inflation growing at a 2.5 percent, well above the Banks two percent target, and the U.K. economy growing at a 2.6 percent annual rate ., the committee judged that an increase of 0.25 percent in the official bank rate was necessary to bring CPI inflation back to the target in the medium term.

“Although energy prices should moderate in the medium term, some recovery in profit margins and pay growth is likely to mean that consumer price inflation will move only gradually back to the target," said the central bank.

The European Central Bank also hiked its key rate by a quarter point, moving it up to three percent in a decision that was widely expected.