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Shock as UK rates rise to 5.25% |
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The Bank of England has raised UK interest rates to 5.25% from 5% in an effort to curb inflation.
Analysts had been anticipating a rate rise in the near future, although they expected policymakers to wait until next month to take action.
Consumer price inflation has recently risen to 2.7%, the highest level in more than a decade.
Policymakers increased the cost of borrowing twice last year in an effort to stem inflationary pressures.
The news will come as an unwelcome surprise to many homeowners. It will add £16 to the monthly payments of those with a £100,000 repayment mortgage.
But the rise will be welcomed by savers if banks and building societies pass on the increase to their savings rates.
'Surprise'
In a statement announcing its decision, the Bank of England said it expected consumer inflation to rise further in the near future.
Inflation is already well above the government's 2% target and some analysts believe it will exceed 3% when the latest figures are published this month.
"The timing is a surprise," said Ross Walker, UK economist with the Royal Bank of Scotland.
"What this perhaps tells us is that we have a nasty inflation number coming next week and they wanted to act pre-emptively."
Employer groups expressed disappointment at the move, saying it could harm already struggling businesses.
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