The Bank of England (BOE) on Thursday, amid inflation concerns, raised its benchmark interest rate to 0.5 percent, the first back-to-back increase in over 17 years.

In a surprise split decision, four of the nine members of the Monetary Policy Committee (MPC) wanted to raise interest rates by half a percentage point to 0.75 percent, which would have been the biggest increase in borrowing costs since the BOE became operationally independent 25 years ago.

The majority, including Governor Andrew Bailey, voted for a 0.25 percentage point increase.

The pound jumped by around two-thirds of a cent against the U.S. dollar to above $1.36, its highest since January 20. British government bonds sold off, with the 10-year yield hitting its highest level since January 2019.

"Although a quarter-point rise may have a limited impact on most firms, many will view back-to-back rate hikes, and four MPC members voting for a more significant rate rise, as a leap towards a sustained period of significant monetary tightening," Suren Thiru, head of economics at the British Chambers of Commerce, said.

The move follows hot on the heels of a rate hike in December, marking the first back-to-back increases in Bank rates since 2004 and reflecting urgency among MPC members to show they are on top of a growing cost-of-living crisis.

The BOE said consumer price inflation – which stood at 5.4 percent in December – now looks set to peak at around 7.25 percent in April, which would be the highest rate since the recession-ravaged early 1990s and miles off its 2 percent target.

In contrast, the European Central Bank announced to keep key interest rates unchanged on Thursday.

(With input from Reuters)