The Bank of England on Thursday raised UK interest rates by 50 basis points to a 15-year high of 5% to counter stubborn inflation, which remains unchanged at 8.7%, well above the main target of 2%.
This marks the 13th increase in UK interest rates in a row, going back to December 2021.
The decision exceeded market expectations, which had anticipated a smaller 25 basis point increase.
The bank said the impact of "domestic price and wage developments… were likely to take longer to unwind than they did to emerge."
"Twelve-month inflation fell from 10.1% in March to 8.7% in April and remained at that rate in May. This is 0.3 percentage points higher than expected in the May Report," it said.
"Services CPI inflation rose to 7.4% in May, 0.5 percentage points stronger than expected at the time of the May Report, while core goods price inflation has also been much stronger than projected."
Jeremy Hunt, the Treasury chief, has expressed his support for the hikes.
"High inflation is a destabilizing force eating into pay cheques and slowing growth. Our resolve to do this is watertight because it is the only long-term way to relieve pressure on families with mortgages. If we don't act now, it will be worse later," said, Hunt, chancellor of the Exchequer.
