What's going on?

The Bank of England (BoE) raised interest rates by the most in 27 years on Thursday.

What does this mean?

Five 0.25% hikes in a row from the BoE, and UK inflation still hit another 40-year high in June. So no more Mr. Nice Guy: the central bank increased interest rates by 0.5% on Thursday, with eight of its nine policymakers voting in favor of a hike that takes rates to the highest level since the financial crisis (tweet this). And it didn�t stop there: the BoE also laid out plans to sell some of the $1 trillion-plus worth of bonds it�s accumulated over the years. This, after the BoE said last month that there would be no �ifs or buts� in its commitment to bringing inflation back to its 2% target, and warning on Thursday that it wouldn�t hesitate to act forcefully again if it had to.

Why should I care?

The bigger picture: It�ll probably have to�
The BoE now thinks inflation will peak at 13.3% in October, which holds water: the UK�s energy price cap is set to rise again in winter, causing the average household energy bill to increase by around 75%. And even when inflation has peaked, Brits won�t be out of the woods: the central bank is forecasting a recession in the fourth quarter of the year � one it thinks will last for the whole of 2023.

For markets: Ditch the pound.
The BoE has now joined the 70-odd central banks around the world that have now raised rates by 0.5% or more this year. But it�s still no match for the US Federal Reserve, whose back-to-back 0.75% hikes have made the dollar much more appealing to international investors and savers. The BoE�s relatively easy-does-it approach, then, might be why the British pound fell versus the dollar after the announcement.