The Bank of England raised Britain's interest rate on Thursday from 5.5 percent to 5.75 percent, the highest level since March 2001.

The Monetary Policy Committee of the Bank warned that inflation remains a danger, saying "most indicators of pricing pressure remain elevated."

Inflation was at 2.5 percent in May, but Bank Governor Mervyn King said only two weeks ago that "further action" on interest rates could be necessary.

Economists predicted the rate rise as a near-certainty, with the Bank been to bring inflation back down to its 2 percent target. Some analysts have taken that to mean there may be a further rise this year.

The rate rise, the fifth since last August, will cost borrowers on average an extra 16 pounds a month in repayments on a typical 100,000 pounds home loan, but it is good news for savers who should earn higher interest.