The Bank of England has increased interest rates by half a percentage point to a 15-year high of 4 percent, even as a signal that further increases will depend on economic data.
The Monetary Policy Committee voted seven to two to raise rates for the 10th time in a row.
The committee dropped language in its statement that it could act “strongly” in the future, adding that further rate hikes would only be necessary if there were new signs that inflation would remain too high.
“If there is more persistent evidence [inflationary] pressure, then further tightening in monetary policy will be required,” MPC said in a statement agreed by all nine members.
The new statement, which added more conditionalities on bad inflation news, suggested interest rates could rise to a new level of 4 percent, lower than the 4.5 percent expected by financial markets.
There was no attempt by the BoE to suggest that financial markets had been wrong in expecting an interest rate cut later this year. But the committee explained that it is necessary to see evidence that the underlying inflation is falling and has not declared victory.
MPC members said they assessed “if the risk to inflation is significantly skewed to the upside,” which underpinned the majority’s continued concern about price increases and justified the large interest rate hike there.