Bank of England increases interest rates to a five-year high

5% interest

The Bank of England has increased UK interest rates to a five-year high of 5% because of inflation concerns. Its one quarter of a percentage point rise was widely expected by analysts.

The move is a bid to cool inflation which, led by higher utility bills, is currently running at 2.4% - more than the government's 2% target.

Commenting on the Bank of England’s decision to raise interest rates, John Risk, Principal Economic Adviser at Greater Manchester Chamber, said: “We were expecting the Bank of England to raise interest rates this month due to the current concern over inflation.

“Our latest Quarterly Economic Survey showed that increasing inflation was a big concern among our members, especially over their energy costs. Also, they were less confident of economic prospects for 2007 and this interest rates rise will add to their concerns.

“The Bank of England has tackled the issue of inflation by raising interest rates. However while we understand the motives behind the decision, we would place emphasis on the fragility of the current economic situation and stress that further interest rate rises may impair this.”