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The Bank of England (BOE) on Thursday, March 23, raised its interest rates by 0.25 percentage points, from 4 percent to 4.25 percent, in an effort to combat rising inflation. Despite the recent upheaval in the banking sector, the central bank proceeded with the expected increase, setting its benchmark lending rate at its highest level since 2008.

The move comes as the UK economy avoids recession for now and the BOE predicts that inflation remains a significant risk. It is the 11th straight increase for the central bank and follows similar hikes at the US Federal Reserve and European Central Bank.

The BOE's decision, supported by a 7-2 majority of policy makers, keeps the possibility of further rate hikes open if inflation continues to pose a threat. Notably, none of the BOE staff members dissented from the decision.

Also read: Fed hikes interest rate by 25 bps to 5%, hints at 'some additional policy firming'

Amidst a time of financial market turmoil that is threatening the economic outlook, Governor Andrew Bailey and his colleagues at the BOE are focused on curbing inflation.

The central bank has downplayed concerns about the stability of the banking system in light of the recent rescues of two major foreign institutions, indicating that tackling inflation is currently their top priority.

“If there were to be evidence of more persistent pressures, then further tightening in monetary policy would be required,” minutes of the meeting released Thursday said, a guidance that’s in step with what the BOE said in February.

These comments from the BOE suggest that the central bank is not yet prepared to bring its current rapid tightening cycle - the fastest in 30 years - to a close.

Investors had recently begun to speculate that the BOE would pause its rate hikes, but those expectations quickly shifted following the release of Wednesday's inflation data, which showed an unexpected increase.

Also read: Finance Ministry to review public sector bank performance on March 25, likely to issue advisory: Sources