Interest rates have increased for the third time in four months as the Bank of England tries to calm the rise in the cost of living.
The rise from 0.5% to 0.75% means rates are now at their highest level since March 2020, when Covid lockdowns began.
Energy bills and food costs are increasing and there is concern the war in Ukraine will push prices up further.
Explaining why it had lifted its forecast, it said that the invasion of Ukraine by Russia “has led to further large increases in energy and other commodity prices including food prices.
“It is also likely to exacerbate global supply chain disruptions, and has increased the uncertainty around the economic outlook significantly,” it added.
Prices had already increased by 5.5% in the year to January, the fastest rate for 30 years and well above the Bank’s 2% inflation target. The Office for National Statistics (ONS) said that energy and fuel prices had contributed to the rising cost of living.
The Bank’s policymakers cited the rising cost of living and strong employment as the reasons for the latest rate rise.
The members of the Monetary Policy Committee (MPC) felt that “given the current tightness of the labour market, continuing signs of robust domestic cost and price pressures, and the risk that those pressures will persist”, an interest rate rise was justified.
It also warned that inflation could hit double-digits later in the year if energy prices push up the energy price cap.