Bank of England raises rates and Bailey promises to “stay the course”

The Bank of England raised its key interest rate by a quarter of a percentage point to 4.5% on Thursday and Governor Andrew Bailey said the British central bank would “stay the course” as it seeks to curb the fastest inflation of any major economy.

The central bank is no longer predicting a recession after it revised up growth forecasts from the gloomy projections it released in February, the biggest such improvement since it first published forecasts in 1997.

But it also now expects inflation – which remained above 10% in March – to be slower to fall than it had hoped, mostly due to unexpectedly big and persistent rises in food prices. It also saw stronger wage growth than it previously thought.

A Reuters poll last week showed most economists expected a quarter-point rise in May – taking borrowing costs to their highest since 2008 with its 12th consecutive rate rise – and for the BoE to keep rates on hold after that.