The Bank of England announced a rate hike despite ongoing uncertainty over the future of the U.K. economy.
The Monetary Policy Committee voted unanimously for an increase in rates from 0.5 to 0.75 percent on the back of a strong labor market and credit growth.
The central bank said in a statement that if its macroeconomic forecasts proved right, the BOE would probably have to increase rates further, albeit gradually. In its latest inflation report, released Thursday, forecasts show that consumer price rises will hit 2.2 percent in 2019 and 2.1 percent in 2020.
The change in interest rate will bring higher costs for those borrowing money, including mortgages. On the other hand, it will likely benefit savers.
Governor Mark Carney told reporters Thursday that economic growth rebounded in the second quarter, after a slight slowdown at the start of the year. Carney said the slower economic activity seen in the first quarter was caused by cold weather.