BOE: Hikes rates by 25bps to 5.25%, hints at long haul on higher rates

The Bank of England's MPC split 6-3 to hike its key Bank Rate by 25 bps to 5.25%, with two members voting for a 50bps hike, and policymakers again said they would hike further if there was evidence of more persistent prices pressures.

• The Bank hinted at rates being at these elevated levels for perhaps longer than currently expected, saying rates would be kept 'sufficiently restrictive for sufficiently long' to return inflation to target.
• The BOE's forecasts were based on an assumed peak in Bank Rate of just over 6% and an average over the 3-yr horizon of just under 5.5%.
• Inflation through the forecast was higher than the MPC's May expectations, but is expected to slow over coming months. Service inflation is expected to remain elevated at current levels in the near term.
• Risks around the modal inflation outlook remain skewed to the upside on market rates, albeit less than seen in May.
• The MPC said that some of the upside inflation risks had begun to crystallise, and had been brought into the modal forecast, shrinking the upside skew.