At its meeting on 1 February, the monetary policy committee (MPC) voted by a majority of 7–2 to increase interest rates to 4%. Two members voted to maintain bank rate at 3.5%.

The Bank said that ongoing inflation is being affected by high energy prices and a tight labour market with rising wages, although this has eased off compared with the last quarter of 2022. However, it does expect inflation to fall quite rapidly in the latter part of the year to around 4%, while there will be a ‘much shallower projected decline in output than in the November report forecast’.

There is likely to be a further increase to the base rate with the Bank indicating that it will raise interest rates by a further 0.5% before the summer. Longer term it expects the rate to fall to 3.25% by 2026, indicating that the days of low interest rates will not be seen again.