The Bank of England has increased interest rates for the 12th consecutive time, setting the borrowing cost at 4.5%. The bank has also issued a warning that inflation would be higher this year compared to its previous estimates. The Monetary Policy Committee stated that there would be no recession this year and has revised its economic growth projections, which is the biggest increase seen in any of its previous reports.

This is a remarkable change from just a few months ago when the bank was forecasting the longest recession in modern British history. Nevertheless, the upgrade in forecasts still indicates modest economic growth for this year and the next.

The Bank of England has hinted that interest rates may have reached their peak. However, it expressed surprise at the rapid increase in food prices, indicating that inflation, which refers to the rate of price increase per year, would remain high this year and next.

The bank’s new inflation forecast is around 5% by the end of this year, up from its previous prediction of 4%. Although this forecast suggests that the Prime Minister may barely meet his goal of halving inflation this year, the bank’s previous projection was viewed as a modest target.

As interest rates have now climbed to the highest level since 2008, an increasing number of households are feeling the impact of elevated borrowing costs. However, the bank notes that only a third of the pain from higher mortgage payments has affected the economy so far.