The Bank of England on Thursday raised its key interest rate by 50 basis points to 2.25%, its seventh consecutive rate hike, bringing borrowing costs to the highest level since 2008.
The bank has also decided to reduce its stock of UK government bonds by £80 billion ($90 billion) over the next 12 months, to a total of £758 billion.
It said uncertainty around the outlook for UK retail energy prices has fallen after the government announced support measures including an Energy Price Guarantee.
“Given the Energy Price Guarantee, the peak in measured CPI inflation is now likely to be lower than projected in the August Report, at just under 11% in October,” read a bank statement.
“Nevertheless, energy bills will still go up and, combined with the indirect effects of higher energy costs, inflation is expected to remain above 10% over the following few months, before starting to fall back.”
The British central bank said it will take necessary actions to bring down inflation to “the 2% target sustainably in the medium term.”
The UK’s annual inflation unexpectedly edged lower to 9.9% in August, from 10.1% in July, which was the highest reading since 1982.