The Bank of England raised its interest rates to their highest level since late 2008. This step was taken to combat stubbornly high inflation in the UK. The decision taken on Friday by the Bank's nine-member Monetary Policy Committee still leaves question marks.

Today, the Bank of England's nine-member Monetary Policy Committee officially lifted its primary interest rate by a quarter of a percentage point to 4.5 percent.

Even though this interest rate increase has been widely anticipated in the financial market, the Bank of England still makes this the 12th in a row. The Bank of England, like other central banks around the world, is still trying to control inflation.

The Bank of England started raising interest rates in late 2021. However, market attention is now towards higher interest rates, which can make household and business lending more expensive.

Meaning the market potential spends less and reduces upside demand pressure. Borrowers also see that the market will face higher borrowing rates when locking in new deals. Despite this increase in interest rates, the Bank is expecting a slight rebound shortly.

Bank of England Lifts Inflation and Growth Forecast, Warning Prices to Be Higher for Longer

"The level of growth is still weak," said the Bank of England Gov. Andrew Bailey. In other words, its economic projection will still have the potential for revisions. Bailey noted that these projections indicate the possibility of a UK recession this year following higher inflation.

The headline consumer price index rose by an annual 10.1% in March. This is predominantly driven by high food and energy bills and the UK economy entering a recession this year, at least according to the updated growth forecasts in its Monetary Policy report.

"There has been upside news to the near-term outlook for global activity. UK weighted world GDP is now expected to grow at a moderate pace, especially when looking at the forecast period," said the Monetary Policy Committee in its May report.

MPC added that risks remain, but the interest rate hike from the Bank of England has helped to offset further shock. And this means that there will only be a small impact on GDP, significantly, if credit concessions are tightened in the recent global sector development.

Compared to the Fed, the Bank of England's preparation is now on what comes next. Fed hints that pausing rate hikes is a way to cope with what is happening now. Meanwhile, economic projections form the basis for policymaking for the Bank of England.

The Bank of England guarantees it will stay the course in overcoming inflation. The Bank revised its economic forecast and said it would expand by 0.25% in 2023. Now, economists are split over whether the Bank will continue to lift borrowing costs or close to peaking.

Hikes Interest Rates for 12th Time in Battle with Inflation, Bank of England Says Get Ready for 2 More Years of Surging Prices.

Meanwhile, the Bank of England has admitted that Britain will face two more years of surging prices. Andrew Bailey refused to accept that this was caused by rampant inflation. The Bank expects inflation to remain above its 2 percent target until 2025.

The 12th interest rate increase made the Bank warn that high food prices were the main reason. Policymakers also suggest that the Bank of England must find other ways to deal with inflation.Moreover, the interest rate rise can inflict economic pain on small firms.

This Friday, the Bank of England raised interest rates by a quarter of a percentage point. Inflation, which is still high and can cause a recession, is the 12th main reason for the rate increase. But the concern is now heading to small firms.