That's it for our live coverage of this month's interest rates announcement. Thanks for joining us.

The live page writers were Rob Corp, Claire Heald, Catherine Evans and Heather Sharp.

There'll be further updates and reaction in our news story here. Or if you need to know a bit more, check out our explainer - what are interest rates and how high could they go?.

We're about to wrap up our live coverage - so here are the headlines:

• The Bank of England has raised interest rates from 1% to 1.25% as it tries to get a handle on soaring inflation
• It's the fifth consecutive rise since December and puts rates at their highest for 13 years
• The Bank expects the UK economy to shrink by 0.3% in the second quarter and inflation to rise further, to above 11% in the autumn

• Three members of of the Bank's nine-strong committee - along with some analysts - favoured an ever bigger rise of 0.5%
• Finance experts said those on variable or tracker mortgage rates would be hardest hit, and savers would see little benefit
• The British Chambers of Commerce said the rate rise adds further concern for businesses already facing soaring cost pressures and labour shortages

The days of interest rates at historic lows now seem to be behind us.

Today has seen the fifth consecutive rise since December.

Here's how rates have changed.

Image source, Getty Images

It claims it's prepared to act "forcefully" on inflation, but the Bank of England has been accused of lacking teeth, compared with other global institutions.

A day after the US Federal Reserve raised rates by the most since 1994 with a 75 basis-point hike, the BoE has increased its Bank Rate by 25 basis points.

"Once again the BoE looks like the timid cat next to the Fed's roar against inflation," says Chris Beauchamp, chief market analyst at trading platform IG Group.

"Accompanying comments about being prepared to act 'forcefully' on inflation will do little when the actual evidence shows the committee remains broadly cautious."

While some have said that today's interest rise doesn't go far enough, others are welcoming it.

Inflation is causing "deep concern" and is the "main driver of pessimism" among business leaders, says Kitty Ussher, chief economist of bosses' group the Institute of Directors.

“What the economy now needs is a sense that inflation has peaked and is starting to fall back.

She adds that we're not there yet, but today’s decision will at least create a sense that "policy action is being taken”.

Image source, Getty Images

An interest rate rise can be good news for savers, but not this time says Sarah Pennells, consumer finance specialist at insurance company Royal London.

"Our research shows almost a third of people were planning to reduce the amount they were saving, while a fifth would stop altogether, as a result of the cost of living crisis," she says.

"For those who can save, the gap between interest rates and inflation, now at 9%, means savers are continuing to lose value on cash they have in the bank."

She says mortgage borrowers on a variable or tracker rate will be hardest hit.

We're getting lots of reaction to the Bank of England's decision to increase interest rates to 1.25%.

And some don't think it has gone far enough.

Kallum Pickering, senior economist at Berenberg, tells the BBC it's "hard to be optimistic" about the current situation.

He says not just the UK but the rest of the Western world had "made the mistake last year of overstimulating the economy".

"Then when we suffered these supply shocks which had been amplified by the war in Ukraine and Chinese lockdowns, we've had this additional inflation," says Pickering.

He says people are "spending through this" - and the Bank needs to put a stop to it.

"The risk here - and it's a very serious risk - is the only way the Bank of England can now get rid of the inflation is by triggering recession," he says.

"Better actually just to get this over and done with - that's why markets are now favouring a steeper path for interest rates in the UK and elsewhere."

Image source, PA Media

The Bank's decision to raise rates today shows the seriousness of the country's economic situation, Pat McFadden, Labour’s shadow chief secretary to the Treasury, says.

Image source, PA

The interest rate rise adds an additional pressure for businesses, on top of a weakened economic outlook, soaring cost pressures, and labour shortages, an expert at the British Chambers of Commerce (BCC) says.

David Bharier, head of research at the BCC, says it could impact on smaller businesses which may be reliant on banking or overdraft facilities, such as those buying goods in bulk in an attempt to offset raw material shortages.

“The increase signals the Bank’s intention to tackle inflation but businesses have been raising the alarm about spiralling prices since the start of 2021 and a higher interest rate is unlikely to address many of the global causes of this," he adds.

Martin Lewis, the personal finance expert behind the Money Saving Expert website, has tweeted about the likely impact if the interest rate rise on our pockets.

Lewis reckons people with variable rate mortgages will have to pay £12 more a month for each £100,000 they've borrowed.

On the plus side, he expects that the interest rate paid on savings could rise in the next week - but warns that is not a given.

As we've just heard from Andy Verity, it is the fifth time since December that the Bank’s Monetary Policy Committee has voted to raise the cost of borrowing.

Minutes from the Bank of England’s latest rate-setting meeting also reveal that it expects the UK economy will shrink by 0.3% in the second quarter - between April and June.

The bank did not update its outlook for the third quarter but has previously said it expects GDP to grow between July and September this year. This would mean that the UK would avoid a recession this year – a recession is defined as two consecutive quarters of the economy shrinking.

However, the bank has previously said it expects GDP to shrink in the final three months of this year - at a time when which the price cap on household energy bills is set to increase.

The rise in domestic gas and electricity bills will lift the cost of living to “slightly above” 11% in October, the Bank of England said.

It means the rate of inflation will be more than five times the Bank’s inflation target - that's 2%.

Andy Verity
BBC Economics correspondent

This is the fifth consecutive rise in interest rates.

The Bank started raising them back in December and now they're up at 1.25%.

While the interest rate is now at its highest since 2009, that's because they've been so low for so long.

The reason for that was the Bank of England trying to support the economy through a decade of weak growth and stagnant living standards. They hadn't felt able to raise rates back to their normal level.

And so they've stayed at those emergency lows.

It's interesting that they've held back from doing half a percentage point, which was what a lot of people were expecting.

UK interest rates have risen further as the Bank of England attempts to stem the pace of rising prices.

Interest rates have increased from 1% to 1.25%, the fifth consecutive rise since December last year, putting them at the highest level in 13 years.

It comes as finances are being squeezed by the rising cost of living, driven by record fuel and energy prices.

Inflation - the rate at which prices rise - is currently running at a 40-year high.

Read more here.

Rates rise in 'uncertain time'published at 12:09 British Summer Time 16 June 2022

12:09 BST 16 June 2022

Faisal Islam
BBC Economics Editor

The Bank of England now expects the economy to be weaker immediately, with a fall in the economy in this quarter, and for inflation to be even higher, going above 11% in the autumn when the energy cap resets. It will flesh out these new forecasts in August.

The rise in interest rates to its highest level since February 2009 is intended to stop the global energy price shock becoming entrenched in the UK.

The bank’s spies in every region of the economy say they do not pick up any sign of a reduction in demand for labour, and wage settlements above 5%.

Hence the rise to a rate that would still be considered low by historic standards, but may prove rather high to an economy, to homeowners and businesses that has become accustomed to ultra-low rates after the financial crisis.

Three members of the nine-member committee voted for an even bigger rise of 0.5%, in the aftermath of the bumper 0.75% rise in rates in the US overnight.

The Bank is keeping open a path of further rises. But such is the economic squeeze and the fear of recession, that some economists predict that some of these rises could be reversed within a year.

It is a very uncertain time.

The Bank of England's monetary policy committee has announced interest rates are rising by 0.25% from 1% to 1.25%.

Interest rates are now at their highest level since January 2009.

The Bank of England is about to make its announcement on interest rates.

Will they go up, down, or stay the same?

We'll find out in a couple of minutes, so stay with us.

We've just minutes until the Bank of England announces its plan for interest rates.

If it raises interest rates, people will have less money to spend and it'll be more expensive to borrow.

But if it does nothing, we could see something called a wage price spiral.

Sound fun, like a helter-skelter? It isn't.

Mel Stride, chair of the Commons Treasury Select Committee, told the BBC the bank was "slow to work out that the labour market was going to become as overheated as it has become".

What's a wage price spiral?

According to Stride, economists describe a wage price spiral as when "wages are chasing increasing prices and being bumped up by increasing wages".

So, in a nutshell, it's when higher wages lead to higher prices, which continues in a loop of further rises, as workers seek even higher wages to cope with even higher prices.

Image source, Getty Images

Food prices could rise even more - making families skip meals, says the Institute of Grocery Distribution (IGD).

It warns that prices for basic items like dairy, bread and meat could rise by 15% over the summer, causing "food stress" for many.

Last month, the Office for National Statistics (ONS) recorded that inflation hit a 40-year-high at 9%, as food price rises gathered pace.

The IGD says rising inflation and a decline in real wages (affected by higher prices) could see a family of four increasing their spend on food and groceries from £396 per month to £439 per month.

It's blaming uncontrolled increases in labour costs, trade disruptions caused by Brexit and the weakening of the sterling against other currencies for the rising inflation rate.And the war in Ukraine is also having an effect, with the cost of grain being pushed up by supply problems.

It's not just the UK which is dealing with soaring inflation, rising prices are a global issue right now and causing pain for people all over the world.

Across the Atlantic, the US central bank yesterday announced its biggest interest rate rise in nearly 30 years, hiking its key interest rate by three quarters of a percentage point to a range of 1.5% to 1.75%.

And it's not expected to stop there, with further rises expected. Figures on Friday showed US inflation rising to 8.6% in May - the fastest pace since 1981.

"It's crazy and it doesn't stop," Boston-based chef Ignacio Lopez, who has been watching food prices climb, told us. "Every week things go up."

Brazil, Canada and Australia have also raised rates, while the European Central Bank has outlined plans to do so later this summer.

Read more here.

Image source, Getty Images

Image source, Reuters

Mervyn King, who served as governor of the Bank of England from 2003-2013, says he expects the Bank to "surely act" today by raising rates to tackle rising inflation.

Writing in the Spectator he suggests it should have moved faster to raise rates, referring to "those members of the Monetary Policy Committee who only last year were keen on negative interest rates".

He also says that the UK faces "a difficult couple of years, reminiscent of the 1970s", with real living standards set to fall due to tough economic conditions, and that the government needs to be honest about this.

Image source, .