Kit Rees, investment strategist at Quilter, said the outlook for Britain’s economy “could become more difficult unless we see a meaningful truce in the Middle East.”
Higher interest rates can help slow inflation by reducing spending. However, they also make borrowing more expensive for households and businesses, potentially holding back investment and economic growth.
Eight members of the nine-person Monetary Policy Committee supported the quarter-percentage-point base rate rise. The remaining member wanted a larger half-point increase, meaning all nine backed higher borrowing costs.
Kit Rees, investment strategist at Quilter, said the Bank had previously been able to “largely look through the impact due to an absence of so-called second-round effects of inflation.”
Mr Rees warned that this was “only a matter of time and thus why they feel the need to act now.”
Tom Stevenson, investment director at Fidelity International, said the rate rise was “doubly uncomfortable because raising interest rates might contain inflation, but it also adds to the squeeze on growth.”