By Scott Kanowsky
Investing.com -- The Bank of England hiked interest rates to a new 13-year high as expected, becoming the latest central bank to tighten policy in a bid to stem soaring inflation.
The BoE's base rate was increased for its fifth straight policy meeting, this time by 25 basis points up to 1.25%.
The decision comes as policymakers in the U.K. face a looming cost of living crisis. Inflation in the country touched a 40-year high in April, spurred on in particular by rising food and fuel prices.
The central bank raised its inflation forecasts for the year, saying it now expects prices to rise by more than 11% - up from 10% at its previous meeting - citing the impact of the war in Ukraine and supply chain disruptions on food and energy costs. It also lowered its estimates for U.K. economic growth in the second quarter by 0.3%.
The BoE added that any further rate rises will depend on the outlook for the economy, but warned that it "will be particularly alert to indications of more persistent inflationary pressures, and will if necessary act forcefully in response."
BoE policymakers have faced increased pressure to address the rising costs, with official data showing public confidence in the central bank's ability to put a lid on inflation is at an all-time low. Governor Andrew Bailey has previously said the central bank will act to curb inflation through rate rises while avoiding "unnecessary disruption" to the economy.
Meanwhile, central banks around the world have recently moved to aggressively tighten policy. The Federal Reserve increased borrowing costs by 75 basis points on Wednesday - the biggest hike since 1994. The European Central Bank also laid out a new path of rate rises last week, while the Swiss National Bank unveiled a surprise 50 basis point hike earlier today.
The British pound was weaker against the dollar following the announcement, trading lower by 0.73% at $1.2083 as of 07:22 a.m. ET (1122 GMT).