The Bank of England raised interest rates for the thirteenth consecutive meeting yesterday as the entire market expected they would. However, they surprised almost everyone by hiking by fifty basis points.

This was most likely in reaction to the May inflation report, which was released the previous day and showed that headline inflation was unchanged at 8.7% while the core actually rose to 7.1% after a reading of 6.8% in April.

The base rate of interest is now at 5%, its highest level for fifteen years.

The market, although taken aback by the newly hawkish stance of the Bank, appreciated that it was taking the lead in the fight against rising prices after an extended period in which it made a series of almost grudging “dovish hikes” each of twenty-five basis points.

This contrasted with the more proactive stance taken by the ECB and FOMC, each of which have hiked rates in larger increments over a similar period.

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