The Bank of England has increased interest rates for the first time in a decade, raising its benchmark by a quarter of a percentage point to 0.5 per cent and signalling the start of a gradual increase in borrowing costs. Voting seven to two in favour of the rate rise, the central bank’s Monetary Policy Committee intended to send a hawkish message that at least two further quarter of a percentage point rate rises would be needed over the next two years to control inflation, but it initially failed to get this message across to financial markets. Mark Carney, BoE governor, was clear the bank’s main message was that the UK economy still required further tightening of monetary policy. “We in fact need those two additional rate increases in order to get that return of inflation to target,” he said, adding that even the rate rises priced in by financial markets “doesn’t quite get there, and the economy is likely to be in a position of excess demand”.