Bank of England raises borrowing cost to new 15-year high of 5.25%

By Aysu Bicer

LONDON (AA) - The Bank of England on Thursday raised interest rates to 5.25% as part of its ongoing efforts to tame inflation, bringing the borrowing cost to a new 15-year high.

The bank hiked its base rate by a further 0.25 percentage points, marking the 14th consecutive rate hike.

The bank said the current inflation, which stands at 7.9% in June, remains well above the 2% target.

"The monetary policy committee will ensure that Bank rate is sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term, in line with its remit," the Bank of England said in a statement.

The bank said it will maintain vigilant oversight over signs of enduring inflationary forces and the economy's overall strength.

This includes assessing the degree of tightness in labor market conditions, as well as observing trends in wage growth and inflation within the services sector.

It also expected the inflation to “fall significantly further,” to around 5% by the end of the year, accounted for by lower energy, and to a lesser degree, food and core goods price inflation.

Services price inflation, however, is predicted to remain elevated at close to its current rate in the near term.

"Underlying quarterly GDP growth has been around 0.2% during the first half of this year. Bank staff expect a similar growth rate in the near term, reflecting more resilient household income and retail sales volumes, and most business surveys over recent months," the bank said.