The Bank of England Monetary Policy Committee raised Bank Rate by 25 basis points to 5.25 per cent.

Julian Jessop, Economics Fellow at the free market Institute of Economic Affairs, said:

“The Bank’s decision to raise rates again, albeit by just a quarter point, suggests that the MPC is still looking in the rear view mirror.

“Money and credit growth have already slowed sharply and other leading indicators of inflation have weakened, including commodity prices and evidence from business surveys.

“It would have made more sense to pause to assess the impact of the large increases in rates that have already taken place, as other central banks have done.

“The UK economy is like a frog slowly being cooked by ever higher interest rates. By raising the temperature further now, the Bank risks doing too much and, once again, only realising its mistake when it is too late.”

Anna Leach, Deputy Chief Economist, said:

"With inflation having come down quicker than expected in June, the pressure was eased on the MPC to deliver another bumper rate rise. But, with inflation close to 8% – quadruple the Bank’s target – and wage growth around 7%, interest rates are likely to head higher in coming months.

"Economic conditions remain challenging for households and businesses alike. For firms, the cost of inputs is a third higher than pre-pandemic, the labour market remains very tight driving up wage and recruitment costs, and demand is sluggish. Meanwhile real incomes are still falling for households and higher interest rates are squeezing spending power further. To drive up growth and living standards in the UK without generating inflation, we need investment to increase the productive capacity of the economy. Improvements in the tax and regulatory system – as recommended in our recently published tax roadmap and green growth reports – can provide a platform for transforming the UK economy".