In a surprising move, the Bank of England raised interest rates to 5.25 percent up by a quarter of a percentage point. The decision has astounded investors as the bank moved ahead with hiking interest rates to ward off rising inflation rates amidst a boom in the housing market and overall strong economic growth. The housing market rose at a much rapid speed unexpectedly last year beating off two interest rate rises and triggering fears that it may form a bubble.
In the meanwhile, the European Central Bank held steady leaving borrowing cost at a five year high of 3.5 percent. However, the European Central Bank hinted that it may increase rates by March to check rising prices if European economy continued to grow.
The British economy was moving at much rapid speed as the strong housing market helped the economy to grow by 2.7 percent in the third quarter, compared with the corresponding period last year. The eurozone, after experiencing a two-year slump, started growing steadily led by a booming growth in Germany, the largest economy of the EU.
According to reports, home prices in Britain have increased 15 percent over the last two years. However, the recent decision bringing rates same level as that of the U.S., caught investors unaware as they were not expecting the recent increase at least for a while.
