As generally expected, the BoE's March MPC meeting delivered an eleventh successive hike in Bank Rate. A 25 basis point increase matched the market consensus and put the benchmark rate at 4.25 percent, its highest level since October 2008. It brings the cumulative tightening to date to some 415 basis points. However, in line with February, the latest vote was not unanimous as both the two main doves, Swati Dhingra and Silvana Tenreyro, continued to push for no change. The split again underscores the very mixed views on where the economy goes from here.

Active QT continues in the background and the bank indicated that as of 22 March, the total stock of QE assets had been reduced to £826 billion, comprising £818 billion of UK government bond purchases and £7.7 billion of sterling non-financial investment-grade corporate bond purchases. Sales will proceed as previously outlined.

With regard to the turmoil in the banking sector, the bank's Financial Policy Committee (FPC) judged that the UK banking system maintains robust capital and strong liquidity positions, and is well placed to continue supporting the economy in a wide range of economic scenarios, including in a period of higher interest rates. The FPC's assessment is that the UK banking system remains resilient.

On the real economy, GDP is still thought likely to have been broadly flat around the turn of the year, but is now expected to increase slightly in the second quarter, compared with the 0.4 percent decline anticipated in February. News since the previous meeting indicates stronger than expected employment growth next quarter and a flat rather than rising unemployment rate.

Inflation last month (10.4 percent) was fully 0.6 percentage points above the bank's call and all but forced the bank to hike. However, it is still expected to fall significantly next quarter and to a lower rate than anticipated last month. This is mainly due to Budget measures, notably the extension of the Government's Energy Price Guarantee (EPG). That said, the bank noted that although nominal wage growth had been weaker than expected, cost and price pressures had remained elevated. Persistent pressures here would be expected to lead to additional policy tightening.

Today's statement and minutes suggest that Bank Rate might have topped out but a May MPC vote for no change will probably need favourable developments in both prices and wages. For now, banking sector instability does not appear to be a major worry, but that could yet change.

Having raised Bank Rate ten straight times by a cumulative 390 basis points, the BoE is just about expected to make it eleven in a row with a 25-point move. However, continued turmoil in banking stocks could see rates left on hold.

The Monetary Policy Committee (MPC) of the Bank of England (BoE) comprises nine experts, five of which are senior central bank executives and the other four are external members appointed by the Chancellor of the Exchequer. The MPC previously announced its monetary policy with regard to interest rates and any unconventional policy instruments every month but this was changed when the meeting schedule was truncated to eight a year in 2016. With a view to enhancing policy transparency, as of August 2015 the minutes of the MPC's deliberations, which indicate how each member voted, have been released alongside the policy announcement. Forward guidance was introduced in August 2013 but since then its framework has become increasingly qualitative and now provides only limited information about where policy might be headed.

The Bank of England determines interest rate policy at their Monetary Policy Committee meetings. These meetings currently occur during the first week of each month and are an influential event for the markets. Prior to each meeting, market participants speculate about the possibility of a change in the benchmark Bank Rate or unconventional monetary instruments. The MPC may or may not issue a post-meeting statement explaining its decisions in addition to the discussion’s minutes which, since August 2015, have been released alongside the policy announcement. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching. In the middle month of each quarter, the Bank publishes its Inflation Report, which provides a detailed analysis of economic conditions and the prospects for economic growth and inflation agreed by the MPC. This is now made available at the same time as the policy announcement and release of the minutes.

The Bank's monetary policy objective is to deliver price stability - low inflation - and, subject to that, to support the Government's economic objectives including those for growth and employment. A remit announced by the Chancellor in March 2013 hinted that the real economy may have a larger say in policy decisions going forward. Price stability is defined by the Government's medium-term inflation target of 2 percent, as measured by the annual change in the consumer price index. The foundation of the Bank's policy is the recognition of role of price stability in achieving economic stability more generally, and in providing the right conditions for sustainable growth in output and employment. The Government's inflation target is announced each year by the Chancellor of the Exchequer in the annual Budget statement.

As in the United States, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on British markets - and to some extent those in Europe - can be dramatic and far-reaching. The interest rate set by the Bank of England, serves as a benchmark for all other rates. A change in the rate translates directly through to all other interest rates from gilts (fixed interest government securities named after the paper on which they were once printed) to mortgage loans.

The Bank of England sets an interest rate (Bank Rate) at which it lends to financial institutions. This interest rate then affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. It also tends to affect the price of financial assets, such as bonds and shares, and the exchange rate, which affect consumer and business demand in a variety of ways. Lowering or raising interest rates affects spending in the economy.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, few homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the financial markets, while lower interest rates are bullish.