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U.K. hikes interest rates
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January 13, 2000: 7:13 a.m. ET
Bank of England boosts discount rate to 5.75% as inflationary pressures grow
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LONDON (CNNfn) - The Bank of England raised U.K. interest rates by quarter of a percentage point to 5.75 percent Thursday in a widely-anticipated move designed to choke off inflationary pressures.
The hike in its benchmark discount rate is the third since the Bank's Monetary Policy Committee (MPC) reversed its stance of easing monetary policy to stimulate the U.K. economy. It raised rates in increments of a quarter percentage point in November and September 1999.
Markets had expected the bank to raise rates by either a quarter or half a percentage point. The Bank's decision to go for just a quarter point pushed up the FTSE 100 index in London. The benchmark added another 30 points immediately after the announcement, to reach 6,596.10, a gain of 63 points on Wednesday's close.
The pound fell slightly to $1.6437, from $1.6464 before the rate rise.
The MPC said it was necessary to raise rates to meet its medium-term inflation target of 2.5 percent.
In previous rate rises the Bank cited budding inflationary pressures, brought on by a booming housing market and wage growth.
"Looking two years down the line, there are certainly some risks building up," Adam Cole at HSBC Securities in London said before the rate decision. "The worry is that if economic growth is allowed to barrel on at this pace, two years out" the country could see inflation accelerating beyond the Bank's medium-term inflation target of 2.5 percent.
In the third quarter, growth in Britain's gross domestic product accelerated to 0.9 percent from 0.6 percent the previous quarter. The consensus forecast sees the British economy expanding 3.3 percent in 2000.
Critics of a monetary tightening have said a decision to hike rates would fail to take account of the fact that much of Britain hasn't experienced the booming growth evident in London and Southeast England.
Before last September's tightening, the Bank of England had cut rates from 7.5 percent in six moves from October 1998. 
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Bank of England
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