Mumbai: The Bank of England (BoE) raised the Bank Rate – its benchmark interest rate – to a six-year high of 5.5 per cent as inflation rose fastest in a decade amidst high consumer spending and record employment. This is the fourth time that BoE raised its key rate since the start of August 2006.

The European Central Bank (ECB), meanwhile, kept its benchmark interest rate at 3.75 per cent.

BoE''s nine-member policy committee increased the Bank Rate by 25 basis points to 5.5 per cent, the highest since April 2001, pushing borrowing cost in the UK the highest among the Group of Seven nations.

The G7 clubs Canada, the United States, France, Germany, Italy, Japan and the UK.

At 5.5 per cent, UK''s key interest rate is higher than the 5.25 per cent in the US. Canada''s key rate is 4.25 per cent and Japan has the lowest rate at 0.5 per cent.

Bank of England governor Mervyn King had promised to return inflation to the 2 per cent target from 3.1 per cent in March. UK''s inflation rose to its highest since 1997 in March this year and the bank said inflation risks remain.

The rate moves so far have failed to cool the British property market or consumer spending.

House-price inflation was 10.9 per cent in the quarter through April, the second-highest rate in the past two years. Retail sales rose for a second month in March.

A quarter-point increase in Bank Rate should raise the monthly payment on a 200,000-pound mortgage by 30 pounds. Payments will now be about 120 pounds more a month than before the interest-rate increase in August, according to the lenders group.

In London, banks, including Barclays Plc, the UK''s third-biggest and Lloyds TSB Group Plc, the fifth-largest, have announced plans to raise their own interest rate following the central bank''s decision.

Meanwhile, the pound, which hit a 25-year high of $2.0133 on April 18, maintained at $1.9876 in pre- and post announcement trading.

Traders, however, expect another increase. The implied rate on the September interest- rate futures contract was unchanged at 5.94 per cent. The contract, which settles to the three-month London inter-bank offered rate for the pound, averaged about 15 basis points more than the central bank''s benchmark for the past decade.

The UK economy expanded 0.7 per cent in the first quarter from the fourth, the same pace as in the previous two quarters. Gross domestic product grew 2.8 per cent last year, the highest since 2004, and the BoE forecasts a three per cent growth this year.