Pound JUMPS as Bank of England policymaker votes to IMMEDIATELY raise interest rates

The Bank's Monetary Policy Committee (MPC) kept rates at 0.25 per cent today but split over the decision, prompting sterling to move up by around 0.7 per cent against the euro to 1.1524 and 0.6 per cent against the dollar to 1.235.

Kristin Forbes, one of nine policymakers on the MPC, voted to raise rates by 25 basis points to 0.5 per cent, while the rest voted to keep core rates at their current level, minutes from the comittee meeting revealed.

There were also signs that more members could vote to hike rates in the coming months.

Rising inflation, which hit 1.8 per cent in January, and Britain's stronger than expected economic performance since the Brexit referendum are among the factors that could warrant a hike.

The Bank targets an inflation rate of 2 per cent, which is expected to be breached in the coming months - and the MPC has warned there "are limits to the extent that above-target inflation can be tolerated".

One way of keeping rising prices in check is to raise interest rates.

Ruth Gregory, UK economist at Capital Economics, said: "There were signs that other members may be close to voting for a tightening in monetary policy, given that 'it would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted'.

"What’s more, the MPC nudged up its estimate of quarterly UK GDP growth in Q1 from 0.5 per cent to 0.6 per cent.

"However, given the considerable degree of uncertainty surrounding the economic outlook, it still seems unlikely that the MPC will follow the US Fed and raise rates anytime soon.

"A rate rise towards the end of 2018 seems more likely to us – provided that growth remains relatively resilient as we expect."