Dearbail Jordan
Business reporter

Commenting on the rate of price rises, the Bank predicts inflation will fall back to 8% in June before dropping further to about 3% at the start of next year.

However, it also warned that the rate of wage rises risked a slower fall in inflation.

Financial markets widely expect interest rates to peak at 4.5% this year to help drive down inflation.

The Bank had previously said that it would act “forcefully” to control rising prices. But in its latest report the Bank softened its language.

“If there were to be evidence of more persistent pressures then further tightening in monetary policy would be required,” it said.

The chancellor has given his reaction to the news that the Bank of England has hiked interest rates up to 4% - a decision that could impact on your day-to-day finances.

“Inflation is a stealth tax that is the biggest threat to living standards in a generation, so we support the Bank's action today so we succeed in halving inflation this year," Jeremy Hunt says.

His statement adds: “We will play our part by making sure government decisions are in lockstep with the Bank's approach, including by resisting the urge right now to fund additional spending or tax cuts through borrowing, which will only add fuel to the inflation fire and prolong the pain for everyone.”

Faisal Islam
Economics editor

The immediate recession should be milder and shorter than previously expected, as energy prices fall, and interest rates do not rise as high as previously expected.

That picture is reinforced by the Bank’s decision, while raising official interest rates to 4%, to remove hints that they might go much higher.

For the first time in this series of 10 consecutive rises, the language suggests that the job might be done, or very nearly done. Further rate rises are no longer presumed. The peak in interest rates could be imminent.

While this is still consistent with the energy shock recession lasting through this year and into next, it is far shallower and does not last as long as the two-year downturn previously predicted.

But on the other side, the recovery out of this downturn in the next few years is expected to be very sluggish indeed.

Let's get a bit more detail now about what this rise means and how the decision was made.

In its report, the Bank of England says its Monetary Policy Committee (MPC) decided to raise rates again due to the ongoing impact of inflation (the rate at which the cost of living is rising).

"UK domestic inflationary pressures have been firmer than expected," the MPC writes.

Explaining further, it writes in its report: "Headline CPI inflation has begun to edge back and is likely to fall sharply over the rest of the year as a result of past movements in energy and other goods prices."

But, it adds, "the labour market remains tight and domestic price and wage pressures have been stronger than expected, suggesting risks of greater persistence in underlying inflation".

As we've just reported, the Bank of England has just lifted interest rates to 4% - their highest level for 14 years.

The rise will hike mortgage payments for some homeowners and those with loans at a time when many people are struggling with the cost of living.

It should benefit savers, if banks pass on the higher rate to customers.

The graph below shows how interest rates have changed over time.

Image source, .

Dearbail Jordan
Business reporter

The UK is set to enter recession this year but it will be shorter than previously thought, according to the Bank of England.

It expects the economy to “fall slightly” in 2023 as energy costs and other prices continue to ease.

The Bank forecasts that the inflation rate will continue to slow this year and firms are likely to hold off on making redundancies.

It comes as the Bank raised interest rates by half a percentage point to 4%.

It is the tenth increase in borrowing costs in a row and will add pressure many households already struggling with the cost of living.

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

It has just lifted interest rates for the tenth time in a row, increasing them by half a percentage point to 4%.

Kevin Peachey
Cost of living correspondent

An increase in interest rates would come when family budgets are already stretched.

Today, the consumer group Which?, estimates that about 2.3 million households would have missed or defaulted on at least one payment of their mortgage, rent, loan, credit card, or domestic bills in January.

That’s a month, post-Christmas, when missed payments are usually at their worst.

The estimate is similar to the same month in the previous two years.

But Rocio Concha, the group’s director of policy, has appealed to businesses in essential sectors - such as food, energy and broadband - to do more to help customers "get a good deal and avoid unnecessary or unfair costs and charges”.

Image source, Getty Images

The UK is not the only country that has been raising interest rates over the past year in an attempt to slow inflation - the rate at which prices rise.

Last year, the US central bank - the Federal Reserve - announced a series of big rate rises in its attempt to keep price increases under control.

On Wednesday, US rates rose again, taking the Fed's benchmark rate to a range of 4.5%-4.75% - the highest since 2007.

While Wednesday's increase was not as big as some seen last year, the bank's chairman, Jerome Powell, warned there could be more rate rises on the way, saying: "The job is not yet done."

Interest rates in the eurozone have also been increasing, and the European Central Bank, which sets rates for the 20-nation bloc, is expected to lift them again later today.

We're about 10 minutes away from the Bank of England's latest decision on interest rates.

The UK's official base rate is widely expected to go up to 4% - its highest level in 14 years.

We will continue to bring you all the latest updates, analysis and how this could impact you.

We've got very used to hearing gloomy things about the economy in recent months.

Inflation - the rate at which prices are rising - hit a 40-year high towards the end of last year. It's something the Bank of England has been trying to tackle by gradually hitching up interest rates.

Inflation has dropped back slightly now, but it's still eye-wateringly high mainly due to soaring energy prices and food costs. Wages are not keeping up with those rising prices, which is one of the reasons we're seeing so many strikes.

The UK economy has so far managed to avoid recession - but only narrowly. And there are forecasts that a slowdown will happen this year. What does this mean?

Well, if the economy is doing well, the economic activity of companies, government and individuals increases month by month, meaning people are, on average, slowly getting a little bit richer - this is economic growth. A recession is when the opposite happens, and the economy shrinks. If it shrinks for two consecutive three-month periods, that's classed as a recession.

The last official figures we had, on 13 January, showed a little bit of growth in October and November - driven partly by the men's football World Cup - had technically kept recession at bay. But the UK is not out of the woods yet, by any stretch of the imagination.

As we stand by for the Bank of England's decision in around 20 minutes, you can check to see what impact a potential hike in interest rates could have on your monthly mortgage repayments with our calculator.

Follow this link to put in how much you’ll borrow, and the tool will let you compare repayments at different rates and over various periods of time.

Credit cards and loans

Bank of England interest rates also influence the amount charged on things such as credit cards, bank loans and car loans.

Even back in October, the average annual interest rate, external was 20.73% on bank overdrafts and 19.31% on credit cards.

Savings

Individual banks and building societies usually pass on interest rate rises to customers.

But although this means savers get a higher return on their money, interest rates are not keeping up with rising prices.

This means the value of cash savings - its buying power - is falling in real terms.

Ben Boulos
BBC Breakfast presenter

Image source, PA Media

Mortgage broker Andrew Montlake tells me how first-time buyers and re-mortgagers are impacted differently by interest rate rises.

He says for first-time buyers, 2023 could be a good year to get on the property ladder as prices have eased slightly making mortgage payments closer to the cost of rent.

"If you're re-mortgaging, that's where a lot of the issues are occurring," he says.

"Taking a mortgage out four or five years ago meant you might be paying around 1.5% at an ultra-low emission rate, and now you are faced with a market which the rate could start with a four."

"You will now be faced with an increase of about £400-£500 a month if you take the best rates," he says.

He says on top of mortgage rises, the increase in energy bills and the overall cost of living is where people are feeling the pain.

Robert Cuffe and Emma Pengelly

Alex Czok and her husband Tom Beech are keen to start a family, having delayed getting married during the pandemic.

They worked out that, allowing for rising energy bills, they could make ends meet during a baby's first year with money set aside for her maternity leave or childcare later on.

But their mortgage repayments are going up by more than double the rise in their energy bills last year.

“Because of the mortgage going up by £300, the money I was thinking of putting aside for the child would eat up most of that, so I will have to wait until we get a better mortgage deal,” Alex says.

She adds that starting a family is going to have to wait.

But when the couple think about how the rising cost of living is affecting millions of other families they say they feel relatively lucky.

Alex says they hope to ride it out by waiting a few years to start a family.

They are still young, but waiting isn't risk free, she adds.

Kevin Peachey
Cost of living correspondent

The answer depends, in part, on what kind of mortgage you hold.

Tracker and variable rate mortgages have risen significantly since December 2021 and look set to do so for a little while longer. Forecasts suggest that they could start to come down again in the summer.

We should hear more from the Bank of England's governor, Andrew Bailey, on that today.

Those on fixed-rate deals soon to expire will almost certainly have to pay more when they remortgage than they did for their outgoing deal. But rates here are already dropping compared with any new deal agreed late last year.

Image source, PA Media

As we've been reporting, a further hike in interest rates today could impact on the cost of borrowing.

When it comes to mortgages, a shortfall equivalent to two or more months' repayments means you are officially in arrears.

But your lender must make reasonable attempts to reach an agreement with you.

Crucially, customers must contact their lender as soon as they realise they are going to struggle to make repayments - the earlier the better. Trained and experienced staff must be on hand to help.

Your lender must treat you fairly by considering any requests about changing how you pay, perhaps with lower repayments for a short period.

Any arrangement you come to will be reflected on your credit file - affecting your ability to borrow money in the future - as will any missed payments.

Your lender might also suggest or allow you to extend the term of the mortgage or let you pay just the interest for a certain period of time.

• Read more here

Inflation reached a 40-year high late last year, and the Bank of England has been raising its base rate over the past year - from 0.25% in December 2021 to 3.5% in December.

The numbers may look small, but higher repayments on things like mortgages, credit cards and car loans can really increase the financial pressure on households.

It’s also a balancing act for the Bank - it doesn’t want to slow the economy too much with its interventions.

Read more: What are interest rates? A quick guide

Image source, .

Let's have a look at the wider context in which today's interest rates decision will arrive.

A consumer affairs specialist at consumer group Which? says there has been a “massive increase” in the number of people missing important payments in January, which he says is a symptom of "something going wrong in the economy”.

Speaking to BBC News, Harry Kind says 400,000 extra households have missed utility bills, mortgage payments, rent payments and even broadband payments over the last month. “Something is breaking,” he says.

Kind explains that there is usually a little increase in missed payments after Christmas every year, but that this year “it is huge”, with people “having to make cutbacks on essential spending”.

He says that higher prices across food, housing and energy have affected people on lower incomes the most, and that is translating to people having to do things such as skip meals.

“Thirty per cent of people on universal credit are in households skipping meals because they can’t afford to make ends meet,” he says. “We’re hearing about people who are literally having a glass of warm milk for their lunch, and if they’re really hungry some toast.”

Kind says companies such as energy providers and supermarkets “really need to step up and do something,” like providing more accessible support for people struggling to pay their energy bills and better access to budget ranges at local shops.

Business owner Jo Williams is worried about the extra costs of an interest rise for her bed sales company and gift shop in Nuneaton.

"We're being squeezed from every single angle," she told the BBC.

Both businesses are battling with product cost increases, higher gas and electric bills and sales are down by 50%.

"There is still money around but everyone's being more cautious - I've never known sales and footfall to be so low,” she says.

The mortgage costs for the bed shop warehouse have gone up by £150 per month and Jo's own home mortgage is also creeping higher.

To make up those losses, she has cut opening times from 09:30-17:00 to 10:00-16:00, and for the first time in eight years, has made a member of staff redundant.

"We tried everything to secure that job but it's a case of having to keep a very, very close eye on cash flow right now," she explained.

The reduced opening time saves around £70-£100 per week but Jo has also docked her own wage by around £1,000 per month to help the business.

Kevin Peachey
Cost of living correspondent

After a decade in which savers saw little return for money they set aside, interest rates in savings accounts have finally improved.

Rates of more than 3% can now be found on an easy access savings account, compared with less than 1% a year ago.

This month sees the start of extra prizes of between £50 and £100,000 on Premium Bonds.

But the buying power of those savings is still being diminished by rising prices.

Inflation, which charts that rising cost of living, is at 10.5%.

And, of course, many people are savers and borrowers.

So, while they might be able to shop around for a better savings deal, they may be facing the prospect of a more expensive mortgage as well.