But with inflation substantially above our target, we are more concerned about the upside risks to our inflation outlook. The broadening of price increases is making inflation harder to avoid and raises the risk that inflation expectations could drift higher.
And with slack now absorbed, the momentum in demand means that monetary policy has a clear role to play in getting inflation back to our target. Against this backdrop, yesterday the Governing Council took the first step on the path to higher interest rates, raising our policy rate by 25 basis points to half a percent.