BOE outpaces peers with rate rise of half percentage point

The central bank seeks to curb the highest inflation rate in the Group of Seven wealthy countries

- Paul Hannon, Chelsey Dulaney and Anna Hirtenstein

The Bank of England raised its key interest rate by half a percentage point Thursday, a more aggressive rate rise than its peers as it seeks to curb the highest inflation rate in the Group of Seven wealthy countries.

The move to raise the lending rate to 5%, its highest level since April 2008, follows smaller rate increases in recent weeks by the European Central Bank, the Bank of Canada and the Reserve Bank of Australia. Last week, the Federal Reserve kept its key rate unchanged.

Across rich economies, inflation has proven tougher to tame than central banks had expected. But the U.K.'s inflation rate has proved particularly stubborn.

Figures released Wednesday showed consumer prices in May were 8.7% higher than a year earlier, unchanged from April. Before the inflation data was released, economists and investors had expected a quarter-point interest-rate increase.

The core measure that excludes volatile items such as food and energy rose to its highest level in more than three decades, a contrast with the U.S. and the eurozone, where it has been falling.

The big reason for that pickup was services inflation, which the BOE has said it is paying particular attention to for signs that rising wages are pushing prices higher.