The Bank of England's Monetary Policy Committee yesterday voted to raise the Bank's base rate by 0.25 percentage points, taking it back up to 4.5%. It came as no great surprise, particularly on the back of more figures released this week showing that previous rate rises had failed to quell the rampant housing market.

Reaction to the increase was largely one of resignation. CBI Director-General, Digby Jones, said: "Business accepts this latest rise as long as the motive is to ensure that interest rates peak at the lowest possible level. But, consecutive rises do mark a shift from the gradualist, well signalled MPC policy of the past and will do little to control house prices, rising due mainly to lack of supply in the housing market, or the inflationary effect of wage increases evident in the public sector."

The Bank said that the global economic recovery is continuing, with official data and business surveys suggesting that output growth remains around, or above, trend. Household spending, public consumption and investment have all grown strongly and the housing market remains buoyant. The labour market has tightened further.

CPI inflation has been below the 2% target, but cost pressures are rising. As indicated in the May Inflation Report, a small and diminishing margin of spare capacity means that inflationary pressures are likely to continue building. Against that background, the Committee judged that a further increase of 0.25 percentage points in the repo rate to 4.50% was necessary to keep CPI inflation on track to meet the target in the medium term.

There has now been 4 interest raise increases in the last month, which has seen the base rate move up from 3.5% to 4.5%, adding around £60 to mortgage repayments per £100,000 of borrowing.