Jonathan Josephs
BBC business reporter

Image source, Getty Images

We mentioned earlier that the UK is not alone in raising rates in an attempt to slow the rate that prices are increasing.

On Wednesday, the US central bank - the Federal Reserve - raised rates again, and now the European Central Bank (ECB), which sets rates for all the countries that use the euro currency, has followed suit.

The ECB has increased all its main interest rates by half a percentage point, saying that it remains focused on tackling inflation.

That takes the main refinancing rate - which affects bank deposits and mortgage costs - up to 3%.

Prices are currently rising at an annual rate of 8.5% across the 20 countries which use the euro.

Food and energy prices continue to be the biggest contributors to rising prices, but the rate at which they are going up has been falling since inflation peaked in October.

The ECB says it intends another rate rise at its next meeting in March as it continues working towards driving inflation down to its 2% target.

We've just been hearing from Labour's Rachel Reeves on BBC Radio 4's World at One who says the rise in interest rates "is not good news".

She says Britain is "uniquely exposed" to increases in prices because of problems with energy and the lack of investment in nuclear and renewable energy sources.

She adds that "it was the failure to respect economic institutions and the mini-budget last year that has contributed to so much of this mess", referring to former PM Liz Truss's and her Chancellor Kwasi Kwarteng's plan that led to market turmoil.

Asked what Labour would do differently, Reeves says the party would implement "not just a sticking plaster approach... but a serious plan to grow the economy".

She says that is why Labour has put so much emphasis on its Green Prosperity Plan.

Image source, EPA

If you're just joining us, or need a recap, here's a roundup of what you've missed.

Interest rates rose... to 4% - their highest level for 14 years - as expected. The Bank of England (BoE) says there are signs that soaring inflation has "turned a corner", but says Brexit, the pandemic and the energy crisis combined have led to an enduring hit on the economy.

Chancellor Jeremy Hunt... backed the decision, saying the government would play its part in tackling inflation by resisting funding "additional spending or tax cuts through borrowing".

At a press conference... BoE governor Andrew Bailey said he expects inflation to come down this year, but warned that people should be prepared for a situation where energy prices may not. "It is too soon to declare victory just yet," he said.

The BBC's Faisal Islam... asked Bailey if interest rates had peaked, to which the governor said he remained cautious. Rates are always subject to re-evaluation of data, he said, adding it's "very early days".

Meanwhile, a recession... is due to hit the UK this year, but it'll be shorter and less severe than previously thought, according to the BoE. The slump is now expected to last just over a year rather than almost two as energy bills fall and price rises slow.

We're continuing to get political reaction to the latest announcement on interest rates.

The Liberal Democrats have called the Bank of England's decision to raise interest rates "a hammer blow to anyone with a mortgage, or whose rent will be upped as a result of this increase".

Writing in a tweet, external, the Lib Dems' Treasury and business spokeswoman Sarah Olney says: "The blame lies squarely with the Conservative government whose continued failure to manage our economy is making everyone in this country poorer."

The Bank of England's news conference has now finished.

However, there's still time to watch it - just click the Play button at the top of this page and rewind the player to 12:30.

Damian Grammaticas
Political correspondent

Downing Street has described today's increase in interest rates as "difficult" for those with mortgages but said it supported the action taken by the Bank of England because reducing inflation was the priority.

Asked about the impact of the rate rise, the PM's official spokesperson said: "This is a difficult time for mortgage holders in the UK. As the chancellor has said, sound money and a stable economy are the best way to deliver lower mortgage rates and keep down the costs of mortgage payments."

He said: "Inflation is the biggest threat to living standards in a generation, so we support the Bank's action today to help us succeed in halving inflation this year."

He added that "inflation is not falling as a given, it is not on a glide path - it requires the government to stick to the difficult decisions it has taken and avoid taking steps that would be inflationary".

And the spokesman said those included not funding additional spending or tax cuts through borrowing, which only serve to fuel inflation further and prolong the pain for everyone.

Bank of England Governor Andrew Bailey says there has been a "turning of the corner" when it comes to inflation, but that it's "too soon to declare victory".

Watch more in the video above.

We've heard comparisons at the Bank of England's press conference between the UK and the EU.

Ben Broadbent, the deputy governor for monetary policy, says the forecast for UK growth is "weaker this calendar year" than for Europe or the US.

However, he says care needs to be taken in just looking at a "snippet of time" because there is a "reasonable amount of volatility" in short periods.

Broadbent says there are a few things that could have contributed to the "relative weakness of the UK" - including the participation of the workforce that has not returned after the Covid pandemic, as well as that the UK is more dependent on gas than continental Europe.

He says these factors are "not things we will endure forever, so one should not expect this to tell us about trends over the next four, five years."

We're continuing to monitor the Bank of England's press conference for any key lines.

In the meantime, here's more reaction to the Bank's decision to raise interest rates to 4%.

Labour's Rachel Reeves says the rise will "worry many families".

She adds: "We don’t have to continue on this path when Britain has huge potential to grow."

Kevin Peachey
Cost of living correspondent

At the Bank of England, there is lots of discussion about what happens next with the economy, and what this could mean for interest rates.

But today's decision will have an immediate impact on many households.

You can read about how you may be affected here.

Some homeowners will also worry about their next mortgage repayment, especially if it is more expensive.

As part of our Tackling It Together coverage, this explains what struggling borrowers can do and how lenders should react.

The BBC's economics editor Faisal Islam asks Andrew Bailey if interest rates might have peaked.

Bailey says we have seen a "turning of a corner" but remains cautious, saying rates are always subject to re-evaluation of data and it's "very early days."

Ben Broadbent, another member of the monetary policy committee adds: "The committee is very watchful".

Image source, PA Media

Bailey says it is "welcome" news that consumer price inflation has begun to "edge back," and is "likely to fall sharply over the rest of the year".

However, he adds that the labour market remains "tight" and domestic prices and wage pressures are "stronger than expected", suggesting that there may be "a greater risk" of underlying inflation persisting.

He concludes that the extent to which inflationary pressures ease will depend on the evolution of the economy, including the impact of significant increases in the Bank's interest rates so far.

Image source, PA Media

Bailey says the full effect on interest rate rises has yet to come through.

"It is too soon to declare victory just yet", he says.

"We need to be absolutely sure we're really turning the corner on inflation," he says.

The Bank will continue to monitor the data very carefully, Bailey adds.

Bailey says it's not certain energy prices will fall - and even if they do, inflation being so high could still have an effect on other parts of life such as wages.

The "tightness of the labour market" reinforces this risk, he says.

The decision, therefore, to increase bank rates by 0.5% to 4% "reflects... uncertainties" in today's economy, Bailey adds.

Andrew Bailey continues and says it is a mixed picture with inflation projections.

He tells the news conference that experts are saying inflation could drop "rapidly", but other pressures are "firmer than expected".

He says they are confident that inflation will come down this year, but "developments over the coming quarter will be crucial".

He notes that inflation above 10% is an unchartered territory - partly caused by "tightness in the labour market".

Image source, Bank of England

Bank of England governor Andrew Bailey says "Since the November monetary policy report we've seen the first signs that inflation has turned the corner."

He says he thinks inflation will fall this year and more rapidly in the second part of the year.

Bailey added that last year's large energy price increases are starting to drop, notably "wholesale gas spot prices have fallen by around 50% since last November."

The Bank of England's press conference has just started.

Stay with us as we bring you live updates.

You can also watch the conference live by pressing the Play button at the top of this page.

Faisal Islam
Economics editor

The Bank assesses that Brexit, the pandemic and the energy shock has led to an enduring hit to the economy.

The workforce has not returned to its pre-pandemic size, unlike other major economies. This is mainly down to early retirements and therefore is likely to prove permanent. Fewer EU workers in key shortage sectors also plays a part.

The Bank has also reassessed post-Brexit goods trade data, and concluded that the hit is notably more than suggested by official data.

It believes that the expected fall in UK productivity after Brexit “might have occurred more quickly than previously assumed”.

In addition, business investment - the key to boosting the economy long term - remains “very subdued” well below pre-referendum levels, hit by both Brexit and the pandemic.

Throw that altogether and an economy that is still now smaller than it was before the pandemic and Brexit, might not exceed that size until early 2026, according to this new analysis.

The promised “roaring” 2020s looking more like a lost half-decade at least.

So the good news is that the immediate shock should be milder, with inflation, energy prices and interest rates higher than they were, yes, but now on a lower path than previously expected.

But the shocks have left an enduring mark on the economy.

Kevin Peachey
Cost of living correspondent

The increase in the Bank rate from 3.5% to 4% means that those on a tracker mortgage will pay about £49 more a month. Those on standard variable rate mortgages face a £31 jump.

This comes on top of increases following the previous recent rate rises.

Compared with pre-December 2021, average tracker mortgage customers will be paying about £382 more a month, and variable mortgage holders about £240 more.

Our mortgage calculator can help you find your figures.

The Bank of England will be saying more about today's decision in a press conference shortly.

Press the Play button at the top of this page to watch live in around ten minutes' time.