The Bank of England has hiked the interest rate by 0.25% to 0.75% as it battles surging inflation.
It is the third increase in a row in as many policy meetings by the bank’s rate-setters and restores the cost of borrowing to pre-pandemic levels.
The rate was slashed to 0.1% two years ago as officials took emergency action to try to cushion the economy and financial markets from the COVID-19 downturn.
The latest increase will directly affect around two million home owners with variable rate mortgages.
Rate-setters have acted to tame a spiral in prices that has taken inflation to a three-decade high at 5.5% – compared to the Bank’s target of 2%.
It is expected to jump further as energy bills rise next month and the commodity price shock caused by Russia’s invasion of Ukraine filters through to consumers.
That shock also looks set to hit economic growth, meaning the bank faces a careful balancing act between raising rates to cool price rises without moving so sharply that it risks helping tip the UK into a renewed downturn.