The Bank of England raised interest rates for the 10th straight time on Thursday and signalled the tide was turning in Britain’s battle against high inflation, forcing investors to dial down bets on a more aggressive tightening of policy. Softening their forecasts of recession this year, the BoE’s nine interest rate-setters voted 7-2 to increase Bank Rate to 4.0% – its highest since 2008 – from 3.5%. The move had been expected by most investors and economists. The announcement comes a day after the U.S. Federal Reserve slowed the pace of its rate hikes with a smaller quarter-point move, but said it expected further increases would be needed.

The BoE – which is trying to smother the risks from Britain’s 10% inflation rate without deepening the expected recession – said its run of rate hikes going back to December 2021 were likely to have an increasing impact on the economy.

That should help to bring inflation down to about 4% by the end of this year, it said. Previously the BoE had forecast 2023 inflation at around 5%.

“Since the November monetary policy report we’ve seen the first signs that inflation has turned the corner,” Governor Andrew Bailey said in a speech following the rate hike. But it’s too soon to declare victory just yet, inflationary pressures are still there.” He said members of the central bank’s Monetary Policy Committee (MPC) would need to be “absolutely sure” that inflation was receding. They said further interest rate hikes would hinge on evidence of more persistent price pressures appearing. That represented a signal to investors that its sharp run of rate hikes might be coming to an end.

Previously the BoE had said it would “respond forcefully, as necessary” to signs of further inflation pressure, and that “further increases in Bank Rate may be required”.