Rate rise a 'body blow to household finances'

THE Bank of England has pushed interest rates higher as it tries to put a lid on soaring prices after UK inflation unexpectedly jumped higher last month.

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Policymakers on the Bank's Monetary Policy Committee (MPC) yesterday voted seven to two to increase rates from 4% to 4.25%, but said they expect the economy to grow slightly in the second quarter of the year, marking a reversal of the 0.4% decline in gross domestic product (GDP) the Bank had anticipated last month.

Inflation is set to come back down this year despite a surprise increase in Consumer Prices Index (CPI) inflation last month, up to 10.4% from 10.1% in January, driven by surging food and drink prices.

"CPI increased unexpectedly in the latest release, but it remains likely to fall sharply over the rest of the year," the Bank said.

It is the 11th time in a row the Bank has hiked interest rates.