Interest rate hits 5% after half percentage point increase

The Bank of England has shocked economists and investors by raising interest rates half a percentage point to 5% - the highest level since 2008.

It comes after the UK's official inflation rate failed to fall as expected in May, staying at 8.7% - well above the Bank's 2% target. In the minutes alongside the decision, the Bank said higher inflation, especially services inflation, meant it had to act faster to bring prices under control. Markets expect the Bank to carry on raising borrowing costs in the coming months, with interest rates slated to peak at around 6% at the turn of the next year. In its minutes, the Bank reiterated that"If there were to be evidence of more persistent pressures [in inflation], then further tightening in monetary policy would be required."

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