The Bank of England has raised interest rates again - this time from 1.75% to 2.25%, taking borrowing costs to their highest level since 2008
Personal finance expert Martin Lewis says the change will mean a rise of £25 a month in repayments for each £100,000 of a variable mortgage
The Bank also forecasts that the UK economy is already in recession - meaning two consecutive quarters of contraction
Its monetary policy committee voted by 5-4 for the rate hike, with three members calling for a bigger rise and one arguing for it to be smaller
Inflation - the measure of how fast prices are rising now compared to a year ago - is currently 9.9% and at its highest level in nearly 40 years
Russia's invasion of Ukraine has pushed up the price of oil and gas, while shortages of goods globally have also made things more expensive
On Friday, Chancellor Kwasi Kwarteng will set out more details on a plan to help households with soaring bills
We're now bringing our live coverage of the Bank of England's interest rates announcement to a close. Thanks for joining us.
The page was written by Victoria Lindrea, Alys Davies, Doug Faulkner and Simon Read.
It was edited by Alex Therrien.
Image source, EPAWe'll soon be bringing our live coverage of the Bank of England's interest rates rise to a close.
Before we do, here's a quick reminder of what has happened today:
The latest interest rate rise is unlikely to be the last one this year, as the Bank of England's rate-setting committee is due to meet twice more before the end of 2022 - on 3 November and 15 December.
Ahead of that, Chancellor Kwasi Kwarteng will set out a mini-budget tomorrow where he will announce how the government plans to deliver the tax cuts that Liz Truss promised during her Tory leadership campaign to help people with the rising cost of living.
For more dates to look out for that might have an impact on your finances, check out our cost-of-living calendar.
Image source, ReutersKwasi Kwarteng will set out his mini-budget tomorrow
Chancellor Kwasi Kwarteng has said he expects the Bank of England to take "forceful action" to contain inflation.
Replying to a letter from the Bank of England's governor, Andrew Bailey, external - explaining why inflation was over the Bank's 2% August target - Kwarteng said the Bank had his "full support" in the mission to get inflation under control.
In the letter, seen by Reuters, Kwarteng stated: "It is essential to businesses and households across the country that inflation is brought back to target."
He adds that he "knows and expects" that the Bank "will continue to take the forceful action necessary to achieve this and to ensure inflation expectations remain firmly anchored".
Kwarteng ends by saying he is focused "unashamedly" on growing the economy. As we've been reporting, he'll set out his mini-budget tomorrow.
Opposition parties are blaming the Conservative government for giving the Bank of England "no choice" but to push up interest rates.
"By putting such huge unfunded and uncosted sums on borrowing," Labour's shadow chancellor Rachel Reeves wrote in a tweet, the Conservative government are "pushing up mortgage costs for everyone".
"Their reckless approach is an immense risk to family finances," she says, adding the government has "lost control of the economy".
Sarah Olney, the Liberal Democrats' Treasury spokeswoman, echoed Labour, saying the interest rates rise would be a "hammer blow to struggling homeowners" and adding it could have been avoided if "ministers bothered to take action sooner on energy bills and the rising cost of living".
Downing Street pointed out the government had set out help for people struggling with the cost of living, including immediate assistance for energy bills.
Chancellor Kwasi Kwarteng is due to set out a mini-budget tomorrow where he's expected to announce tax cuts and more detail on the government's energy bills support package.
The Bank of England is forecasting that the UK economy is already in a recession.
But what is a recession and why does it matter?
Typically, a country's economy grows, with citizens, on average, become slightly richer as the value of the goods and services it produces - its Gross Domestic Product (GDP) - increase.
A recession is usually defined as when GDP falls for two three-month periods - or quarters - in a row.
When this happens it's a sign the economy is doing badly.
A growing economy is not only good for citizens - in terms of jobs, wages, investments - it also gives the government more money in taxes, to spend on public services and benefits, for example.
When the economy shrinks, all these things go into reverse.
A recession can lead to a squeeze on jobs, wages and government support.
However, the pain of a recession is typically not felt equally across society, and inequality can increase.
In Grimsby, self-employed auditor Kristine Green has like millions of others around the country already started cutting back day-to-day, with bills and the monthly cost of her variable-rate mortgage going up.
She says her mortgage has already gone up four or five times in the past year - twice in such quick succession she did not get a letter from her provider.
With today's increase she says her mortgage will soon be edging up to £470 per month, about £100 more than what she paid this time last year.
She counts herself "lucky" that her mortgage is a smaller one, but as she originally bought the property with a partner she is no longer with, she doesn't have the same level of income to remortgage, so is stuck on a variable rate.
As a single parent to two kids, she says she is "very frugal", opting for value options in the supermarket or "cutting little niceties" or treats from the weekly food shop.
Image source, Kristine GreenKristine Green, a single mother-of-two, is struggling with the rising cost of living
Quote Message"I'm not the worst affected, I can still go buy food, but it's difficult for people across the board with everything going up. It's really concerning and getting to the point where there's not a lot left to cut back."
Kevin Peachey
Personal finance correspondent
Image source, Getty ImagesWhen interest rates rise, there is naturally a focus on what it means for mortgage costs.
In short, it means anyone on a variable-rate deal will typically be paying £163 more a month compared with a year ago, according to banking trade body UK Finance.
Anyone renewing a fixed deal which has expired after two years will be facing a rate about two percentage points higher now.
Millions of people do not have a mortgage – but do not think that means you will be unaffected.
Landlords may pass on their higher costs in higher rents. Other types of borrowing are likely to get more expensive.
And, of course, savers – although potentially receiving more in interest – are seeing their pot losing real value because prices are rising so fast.
Image source, Getty ImagesThe pound fell 0.7% against the US dollar following the Bank of England's announcement.
Before the announcement, the pound could buy $1.1364. Shortly afterwards, it fell to $1.1287 before rallying to $1.1321.
The pound is still higher, however, than it was earlier in the day, when it reached a 37-year low.
Kevin Peachey
Personal finance correspondent
This week’s grocery shopping and next month’s energy bill dominate thinking at the moment when it comes to our own finances.
For many people facing the sharp rise in the cost of living, short-term sums are the most important.
But today gives us an insight into what will happen in the months ahead. For example, price rises are at a 40-year high but the Bank says they may not be accelerating too much more.
That doesn’t mean prices will not go up. They will, but eventually at a slower rate.
Many thousands of people will remortgage in the coming months. The expectation of rates rising further means they are increasingly likely to face a shock at the cost of paying back the biggest debt they hold.
Many people "will be breathing a sight of relief" that the interest rate rise was limited to half a percentage point rather than three-quarters of a point, AJ Bell analyst Danni Hewson says.
But it's still "a big deal", she tells BBC News.
Despite the Bank of England being the first major central bank to raise interest rates, Hewson says a lot of experts maintain the bank was "behind the curve and hasn't acted swiftly enough" to curb soaring inflation.
She says the decision to raise the rate by half a percentage point, rather than following the US lead and instituting a more aggressive rise, was probably tempered by the government's recent announcement to cap energy costs for domestic and business users in the UK.
However, Hewson says there remains "a difficult balancing act" for the Bank, weighing up "how much pain" it can inflict "at a time when the economy is slowing down".
The expectation is interest rates will hit 3% by the end of the year and are likely to rise to 4% next year and not fall back again until 2024, she says.
The Bank of England faces an "increasingly tricky balancing act" in trying to keep inflation under control, the British Chambers of Commerce says.
David Bahrier, head of research for the organisation which represents British business, says the Bank's decision to increase interest rates by half a percentage point is a "hard line" approach to tackling inflation.
"Our research shows that unrelenting inflation, largely driven by rising energy costs, is by far and away the top business concern at present," Bahrier says.
"But the Bank faces an increasingly tricky balancing act. The interest rate is a very blunt instrument to control inflationary pressures that are largely driven by rocketing energy costs and global supply chain disruption."
He adds that the Bank's decision to raise rates "will increase the risk for individuals and organisations exposed to debt burdens and rising mortgage costs - dampening consumer confidence".
Faisal Islam
BBC Economics Editor
The Bank of England has continued on its path of interest rate raises, but the real question now is how high are rates now going to go.
Financial markets predict the rate will go close to 5%, and that is higher than in the US and the Eurozone. This reflects higher inflation here.
Today the Bank held back from a jumbo rate rise of three quarters of a percentage point, as the US Fed had done last night. Foreign exchange markets were looking to see whether the UK would follow the US tough rhetoric against inflation too.
But it was a close vote. The Bank expressed some relief that inflation would now peak at 11% next month, thanks to the government’s energy interventions. But rates are still going up because the Bank sees more inflation arising from the British economy itself, even as the energy shock has been muffled.
All eyes are now on November, when the Bank will calculate a new forecast to assess all of the government’s interventions, that bring down inflation, but also raise borrowing. Already the rise in mortgage rates is weighing on the housing market. The Bank believes we are already in a recession. The rate rises will keep coming. Precisely how many is the question.
In its minutes outlining today's interest rates rise, the Bank's Monetary Policy committee says CPI (Consumer Price Index) inflation is expected to rise by less than predicted in August in the near term because of the government's energy price guarantee.
It forecasts that inflation will peak at just under 11% in October, having previously predicted it would surpass 13%. That earlier forecast had been lower than many commercial banks, with some predicting inflation could top 20%.
The Bank adds: "Nevertheless, energy bills will still go up and, combined with the indirect effects of higher energy costs, inflation is expected to remain above 10% over the following few months, before starting to fall back."
CPI is based on the cost of a "basket of goods" , which is constantly updated, with the change in cost since the same date last year giving the month's inflation figure.
Here's a look at how UK interest rates have changed historically - with rates close to zero for more than a decade after the 2008 financial crisis followed by sharp rises this year as inflation has soared.
The founder of Money Saving Expert, Martin Lewis, has responded to the Bank of England's announcement, saying variable mortgages will rise by £25 a month per £100,000 borrowed.
While fixed mortgages won't be changed until they come to an end, new fixed rate mortgages will be "much costlier".
He adds with savings rates, customers should wait a day or two to see how the new rate is factored in and "be prepared to switch".
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As well as increasing interest rates, the Bank of England also forecast that the UK economy is already in recession.
It said that it expected gross domestic product (GDP) - which is a measure of all the goods and services produced by the UK - to have shrunk by 0.1% between July and September, otherwise known as the third quarter.
A recession is defined as two consecutive quarters – or two three-month periods – of shrinking GDP.
UK output shrank by 0.1% in the second quarter of the year. The Bank of England had previously forecast that GDP would grow between July and September before beginning to slow down in the final three months of the year. But it now expects the economy has contracted sooner.
Katie Hope
BBC business reporter
Raising interest rates makes it more expensive to borrow which should, theoretically, encourage people to borrow less and spend less.
It should also spur people to save more.
However, there is also a risk that increasing the rate could hit the UK's economic growth.
Although interest rates are now at a 14-year high, they are still comparatively low by historical standards.
Following the financial crisis, borrowing costs have stayed at, or close to, record lows after the Bank of England intervened with cuts following the UK's vote to leave the European Union in 2016 as well as during the Covid pandemic.
Katie Hope
BBC business reporter
It is the seventh time in a row that the Bank of England has raised rates as it battles to stem soaring prices.
Interest rates have been going up since last December as the rise in the cost of living accelerated.
Inflation - the pace at which prices rise - is currently at its highest rate for nearly 40 years.
At 9.9%, it remains five times the Bank of England's target of 2%.
Inflation is also widely predicted to head higher in October despite government intervention to limit the impact of gas and electricity costs on households.
The Bank of England's Monetary Policy Committee voted by five to four to hike the rate by half a percentage point. Analysts had predicted the rate could have risen as much as three quarters of a percentage point.
It takes the interest rate to 2.25% - the highest level since November 2008, when the banking system faced collapse.
Three of the dissenting members preferred to increase the bank rate by three-quarters of a percentage point - to 2.5% - while the other wished to increase it by a quarter of a percentage point.