Image source, PA Media

We've just had the chancellor's response to the Bank of England's latest interest rates rise.

Jeremy Hunt says: "High inflation, exacerbated by Putin's war in Ukraine, continues to plague countries across the world, eating into people's pay cheques and driving up food and energy prices.

"I know this is tough for people right now, but it is vital that we stick to our plan, working in lockstep with the Bank of England as they take action to return inflation to target.

"The sooner we grip inflation the better. Any action which risks permanently embedding high prices into our economy will only prolong the pain for everyone, stunting any prospect of economic recovery."

Bank and chancellor believe inflation has already peakedpublished at 12:12 Greenwich Mean Time 15 December 2022

12:12 GMT 15 December 2022

Faisal Islam
Economics editor

The impact of the Autumn Statement has been to lower the path of inflation next year, by lowering the expected hike in energy prices.

Growth falls less than expected too as a result of this support, but will be hit later as spending support is withdrawn sharply.

The Bank noted some sharp monthly falls in the housing market, and that fixed mortgage rates had come down from mini-budget crisis highs, but they remained elevated. Earlier this week it pointed to the £250-a-month mortgage shock facing many households.

In the exchange of letters between Bank governor Andrew Bailey and Chancellor Jeremy Hunt, both pointed to projections suggesting inflation had already peaked.

So the patient is far from cured, and more monetary medicine is required, but it may be less than recently expected.

Rates may peak at a lower than expected levelpublished at 12:10 Greenwich Mean Time 15 December 2022

12:10 GMT 15 December 2022

Faisal Islam
Economics editor

While rates have been hiked for the ninth successive time, and are set to go higher, there is a sense from the Bank of England’s deliberations that the medicine is starting to work, so they have lowered the dosage.

The Bank has followed its US counterpart in raising rates by half a percentage point but did not choose the Fed's path of four consecutive 0.75% rises before that.

Britain has a brief one-off experience of such jumbo rate hikes. What does that tell us? That the final resting level of interest rates in the UK will be closer to 4% than 5%. It will likely be reached in the middle of next year, and stay there for some time.

The unexpected development was that two members of the nine member committee voted to leave interest rates at 3% citing a weak economy, signs that existing rate rises were already starting to affect the jobs market, and the full effect of those nine rises “were still to come through”.

If that argument wins through, and the economy remains weak, there is the possibility rates might not even get to 4%.

The Bank of England's decision to raise rates today is the ninth consecutive increase since December last year.

They are now at their highest level since 2008 when a number of bank failures threatened the global economy.

The Bank of England's Monetary Policy Committee voted 6-3 in favour of putting rates up by 0.5%.

It said "further increases in Bank Rate" may be required to tackle what it fears may be persistent domestic inflationary pressures from prices and wages.

"The labour market remains tight and there has been evidence of inflationary pressures in domestic prices and wages that could indicate greater persistence and thus justifies a further forceful monetary policy response," the Bank said.

The Bank of England has raised UK interest rates to their highest level for 14 years as it battles to stem soaring prices.

It lifted interest rates for the ninth time in a row, increasing them by half a percentage point to 3.5%.

The Bank of England will announce whether it is putting up interest rates rise at midday.

Its base rate has been widely forecast to rise by half a percentage point.

We'll break the Bank's decision on this page at the top of the hour - with reaction and analysis to follow.

Kevin Peachey
Cost of living correspondent

Savers will hope that an interest rate rise will see them get better returns for the money they set aside. That is generally what happens when the Bank rate goes up.

Savings rates are better than they have been for some time, although many people leave money in old accounts where the interest rate does not change.

However, the high level of inflation - which shows prices are rising at 10.7% a year - has eaten into the buying power of these savings.

If all this talk of interest rates gets your head in a spin and you're not sure why today's decision matters, then help is at hand.

Here's a quick back to basics guide on what interest rates are - and the actual impact they have on your personal finances.

Image source, PA Media

When the Bank of England raises its base rate - that’s the benchmark rate for UK lending - it affects people with tracker mortgages.

These go up and down in line with the base rate, so it means that if the Bank decides to make the cost of borrowing more expensive today that will translate into higher mortgage repayments.

On Tuesday, the Bank released a report which said that about four million UK households will face higher mortgage payments next year, with the typical payment up by £250.

The average monthly mortgage bill would go up from £750 to £1,000, according to the Bank's Financial Stability Report.

The rising cost would cause severe financial difficulties for another 220,000 households.

So what can those struggling to make repayments do - and how must their mortgage provider help out?

You can find out more about the options open to you here.

Kevin Peachey
Cost of living correspondent

An interest rate rise by the Bank today is likely to have a direct impact on the monthly mortgage bill of 1.6 million households.

They are on tracker or variable rate mortgages.

Millions more are on fixed-rate deals, where the interest rate on the home loan stays the same, usually for two or five years. The key for them is the level of rates when they come to remortgage.

The picture here is a little more complex. Lenders have already “priced in” interest rate rises, and brokers say the cost of new fixed-rate deals is likely to fall slightly in the coming weeks.

That is because they were pushed up sharply by the fall-out from the mini-budget, but the pressure eased as those policies were reversed.

Interest rates have risen sharply as the Bank of England continues to use its powers to tackle soaring prices. At its last meeting in November, the Bank increased its benchmark rate from 2.25% to 3%.

That was the eighth consecutive hike since December 2021, pushing the rate to its highest level for 14 years.

It also marks the biggest single increase since 1989, and could have a big impact on the cost of living and people's finances.

Analysts suggest rates could reach 4.75% next year.However, that peak is lower than predictions had suggested in the weeks following the market turmoil after the government’s mini-budget was badly received. Read more here

Image source, .

Dearbail Jordan
Business reporter

Here we go again. I’m back at the Bank of England and about to step into the imposing, pillar-lined building. Once inside, I’ll descend into the basement which is definitely not as pretty as the Old Lady of Threadneedle Street’s exterior.

On interest rate days, my fellow journalists and I are given the announcement an hour before it is made public so we can analyse it and get a story ready to go live as soon as the clock hits 12pm.

Just to make sure we don’t do anything nefarious with the information, we’re locked in the room and only allowed to bring in a laptop – and the wifi is switched off.

That might sound scary, but it really isn’t. And luckily, the Bank isn’t stingy at all when it comes to tea and biscuits - and this time there's a Christmas tree. See you on the other side.

Faisal Islam
Economics editor

The Bank of England is expected to raise rates to their highest level for 14 years. But amid concerns about a long recession, the expectation is that rates will be increased by a more modest 0.5% points to 3.5%, after November’s jumbo increase of 0.75%.

This would follow the path of the US Federal Reserve which last night raised rates by 0.5% after four consecutive larger increases.

Around the world now central bankers are grappling with balancing inflation that may have peaked but remains very high, with concerns about growth in the economy.

Here as much focus will be on indications as to where interest rates will ultimately get to, say over 4%, and how long they will stay there rather than the speed at which they increase.

Image source, Reuters

The key thing to understand is that raising interest rates helps to control inflation.

Inflation means the rate at which the cost of everyday products is going up. Prices increased by 10.7% in the year to November, compared with 11.1% in October.

Interest rates affect how much money a borrower has to pay back when returning the money in a loan. A higher interest rate makes it more expensive to borrow money.That encourages people to borrow and spend less, and save more - which in turn calms inflation.

The Bank of England is the UK’s central bank, independent of the government. It tries to maintain financial stability and sets the UK’s official interest rate. It has a target to limit inflation to 2% each year - but recently, prices have been rising at about five times that level.

The Bank has repeatedly been forced to raise interest rates recently, and looks set to carry on.But it’s a balancing act. The Bank doesn’t want to slow the economy too much with its interventions.

And in the meantime, higher interest rates mean higher repayments on things like mortgages, credit cards and car loans - increasing the financial pressure on lots of households.

At midday we’ll get the latest announcement from the Bank of England on interest rates.

This is what’s often referred to as the base rate and is the amount it charges other banks and lenders.

So when it changes it affects what they charge their customers to borrow money - whether on credit cards, loans, or mortgages.

Last month the Bank put up its interest rate to 3% - it was 2.25% previously.

Most experts believe it will rise again this month.

We’ll get to why the Bank changes its base rate shortly - but it’s a closely watched decision and we’ll bring it to you on this page at noon.

Then we’ll get reaction as well as analysis from our specialist reporters. Stay with us for more.