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In an 8-1 decision, the monetary policy committee (MPC) just decided to raise interest rates from 0.1% to 0.25%. This 0.15% increase surprised markets, with most expecting no hike from the central bank today. In doing so, the bank becomes the first major central bank to raise rates since the start of the pandemic.

The MPC cited the tight labour market and high inflation as valid reasons for raising rates now. The latest inflation print from Tuesday came in at 5.1%, above expectations of 4.7%. The bank does still note the risk that Omicron could have on economic performance going into the new year.

In terms of reactions, GBP/USD jumped 0.7% to trade at 1.3361. The FTSE 100 did sell off initially, but is recovering and is still up 1% so far today. Banking stocks such as Lloyds Banking Group and Barclays are among the top performers in the index.

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