British interest rates went up for the fifth time in less than year this afternoon to hit a six-year high of 5.75 per cent as the Bank of England (BoE) keeps worrying about inflation.
Borrowing costs for businesses and homeowners have now risen a total of 125 basis points since August last year, and financial markets expect a sixth quarter percentage point increase soon.
The central bank blamed rising price pressures. Inflation would fall back to its 2 per cent target this year, but firms are still planning to jack up prices, the BoE said.
Today's increase had been widely expected after last month's 5-4 vote by the Monetary Policy Committee (MPC) to keep rates at 5.5 per cent. Governor Mervyn King was among those calling for a rise - only the second time that the central bank head has been on the losing side of an MPC vote.
More than a million homeowners may soon face significantly higher mortgage payments as two-year fixed-rate deals, taken out in 2005 when borrowing costs were at 4.5 per cent, come to an end.
That could hit hard when total household debt is already at a record £1.3 trillion sterling, disposable incomes are falling and the savings rate has slipped to its lowest level in nearly half a century.