Bank of England raises interest rates to 0.25% from 0.1%

The Bank of England has raised interest rates to 0.25% from 0.1%.

It is the first time rates have increased since the beginning of the Coronavirus pandemic.

It comes as the hospitality sector faces increasing concern over its future, as the Omicron variant spreads through the country.

The industry has seen a sharp decline in bookings as consumer confidence has waned.

The Bank of England’s monetary policy committee (MPC) of nine members voted eight to one in favour of increasing interest rates to 0.25% from 0.1%.

The central bank said all committee members other than Silvana Tenreyro supported the increase, as inflation continues to soar beyond its target rate.

Meanwhile, the central bank will also keep up its £895 billion quantitative easing programme after a unanimous vote in favour.

The MPC has said that the level of global GDP in the fourth quarter of 2021 is still expected to be similar to last month’s projection, but that consumer price inflation “has risen more than expected”.

It added that the Omicron variant of coronavirus – which has spread rapidly over the past month – poses downside pressure on economic activity at the start of next year.

Bank officials said they have now also revised down their expectations for the levels of UK GDP in the fourth quarter by around 0.5% since the previous Bank meeting, leaving GDP around 1.5% below its pre-Covid level.

“Growth in many sectors has continued to be restrained by disruption in supply chains and shortages of labour,” it added.

“The impact of the Omicron variant, associated additional measures introduced by the UK Government and Devolved Administrations, and voluntary social distancing will push down on GDP in December and in 2022 Q1.”