Bank puts up interest rate

The Bank of England today moved to quell growing inflationary pressures with a second interest rate rise in three months.

The Bank of England today moved to quell growing inflationary pressures with a second interest rate rise in three months.

The Bank's nine-member Monetary Policy Committee voted for a quarter-point increase in the official cost of borrowing from 5.25 per cent to 5.5 per cent.

The move came as a bitter blow to industry and unions which had been urging the MPC to leave base rates on hold in order to help manufacturers still struggling due to the high value of the pound.

They argued that with headline inflation at a 36-year low and the underlying rate still well below the Government's 2.5 per cent target, there was no need for the MPC to act this month.

However with average pay running above the level the Bank regards as being consistent with the inflation target, the housing market continuing to boom and signs of overheating in the service sector, most City analysts had expected that rates would go up.

In his Mais lecture address last month, Chancellor Gordon Brown gave his blessing to the MPC to raise rates again.