Bank of England raises interest rates to 5.5 per cent

The Bank of England raised interest rates to a six-year high of 5.5 per cent yesterday, its fourth quarter percentage point increase since last August.

All 61 analysts polled by Reuters had predicted the move which takes borrowing costs to their highest level since May 2001.

Many predict a further increase, perhaps as soon as next month, as the economy has been growing strongly. House prices jumped another 1.1 per cent last month, according to the Halifax, even though the BoE has raised rates from 4.5 per cent since last summer.

Inflation hit 3.1 per cent in March, more than a percentage point above the BoE's two per cent target, forcing Governor Mervyn King to write an open letter of explanation to the government. (Reuters)