The Bank of England has raised interest rates by 0.5 per cent today (15 December), bringing the current Bank rate to 3.5 per cent. The point of raising interest rates is to reduce inflation: if borrowing is more expensive, people spend less, and the reduced demand in the economy keeps prices from rising too quickly.
But the rate of inflation is already falling. Figures published by the ONS yesterday showed that consumer price inflation (CPI) had reduced from 11.1 per cent to 10.7 per cent last month. So why is the Bank still hiking rates?
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