(Bloomberg). — The Bank of England increased interest rates for first time since pandemic. It left aside the threats to the U.K.’s economy from record-breaking coronavirus infections to take the lead in the fight against rising inflation.

Andrew Bailey’s officials voted 8-1 for a 15-basis point increase in borrowing costs. This is a significant improvement over any other central bank within the Group of Seven since the crisis. Silvana Tenreyro was only one to disagree. Policy makers said more “modest” tightening is likely to be needed as inflation heads toward a peak likely to be around 6% in April.

The BOE’s precipitous shift into tightening mode will surprise the large majority of economists who anticipated no change, and investors who were pricing in around a 40% chance of a move. The outcome was the second in a row featuring a surprise after November’s decision to stay on hold wrong-footed financial markets. 

On the day of the BOE announcement, the U.S. Federal Reserve set a cautious tone by signaling three rate increases next year as well as accelerating its winding down of its stimulus programs. Meanwhile Norway continued its tightening efforts on Thursday with its second increase.  

The BOE hike is a response to the danger posed by surging prices gains, with a report this week showing inflation jumped to 5.1% in November — more than double the central bank’s target — and a separate report Tuesday showing U.K. companies added to payrolls at a record pace.

Considering that backdrop, Goldman Sachs Group Inc. Chief European Economist Jari Stehn told Bloomberg Television just hours earlier that an outcome of no change was “not a done deal,” even though it was his main expectation.

Because the United Kingdom is currently in the grips a new coronavirus outbreak driven by an infectious omicron variant of the virus, the decision to relocate is even more extraordinary. Daily case loads have risen to their highest level since the start of the pandemic. 

The danger that poses in potentially overwhelming the country’s health services is such that Prime Minister Boris Johnson’s government has reintroduced some curbs on activity, with more possible in coming days and weeks if the outbreak can’t be quelled.  

The BOE moved now to heed a warning from the International Monetary Fund this week, cautioning against inaction regarding inflation policy.  

The Fed’s shift on Wednesday underscores the level of alarm felt by some global central bankers. As Chair Jerome Powell indicated that inflation was now the enemy number one, it laid out a roadmap for future rate hikes. 1. To keep the U.S. economy expanding on its current track. 

On Thursday, the European Central Bank will explain its plans for moving beyond emergency stimulus. President Christine Lagarde has been at pains however to persuade investors that a rate increase in the euro zone isn’t going to happen any time soon. 

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