The Bank of England has increased the base rate to 5% - up from 4.5%
It's a bigger increase than most forecasters expected
The last time the base rate was 5% or higher was in 2008
Higher interest rates are intended to lower inflation, by giving mortgage-holders less to spend
The government's target is to have inflation down to 5% by the end of the year
Rishi Sunak says: "I always said this would be hard - and clearly it's got harder over the past few months"
But he adds: "I am totally, 100%, on it, and it's going to be OK"
Seven of the nine members of the bank's committee voted for the 5% rate - two wanted no change at all
Image source, PoolThe prime minister reiterates the government's support to help with the cost of living, through the energy price cap, freezing fuel duty and capping bus fares.
"We are on it," he repeats, adding that tackling inflation is "not easy" and "if anyone tells you it's easy and can happen overnight, they're not being straight with you".
"I'd love to cut taxes," Sunak continues to say in his speech adding he has to think carefully about what to pay the public sector.
He says if he gave in to everything people asked for every time it would fuel inflation.
Sunak refers back to a speech he made at the start of the year outlining his priorities as PM and reminds everyone his first priority is to halve inflation.
"Rooting out inflation is not easy," he says. "It requires difficult decisions.
"If we don't get on top of it, it will just get worse.
"Even though it means we have to make difficult decisions, that's the kind of prime minister I am."
He says he is confident if the government holds its nerve inflation will reduce.
Image source, PoolRishi Sunak is in Kent speaking to businesses.
He starts off by mentioning the recent rise in interest rates and how he understands it might be filling firms with "anxiety".
"I am totally 100% on it, it is going to be OK and we are going to get through this," he says.
He tells the audience that the UK is not alone in "grappling" with inflation as "many countries" are.
If you're just joining us let's give you a quick recap of where we are at.
For the 13th time in a row, the Bank of England has raised interest rates.
In a break from the previous quarter point jumps the Bank has put them up by half a percentage point.
Inflation now sits at 5% and is at the highest level since September 2008.
We have had plenty of political reaction so far, but we're now hearing from the Prime Minister who is in Kent.
Stay with us and you can watch what Rishi Sunak has to say by clicking Play at the top of this page.
Image source, Getty ImagesSome economists have said the UK needs to enter a recession, which is when the economy shrinks for two three-month periods in a row, in order to bring down inflation.
It has been suggested that a recession, which could result in job losses, would lead people to spend less, and then cause prices to stop rising as quickly.
Asked if the Bank will do "anything it takes" to bring down inflation, including causing a recession, Bailey replies: "We're not seeking to precipitate a recession and we've got an economy that is much stronger and more resilient than we expected, part of that is because energy prices have gone down so much."
"We are not expecting, we are not desiring recession but we will do what is necessary to bring inflation down to target," he adds.
The Bank is tasked with keeping inflation at 2% annually, currently it is more than four times that at 8.7%.
Andrew Bailey, the governor of the Bank of England, has been speaking to the media following the decision to increase interest rates.
He starts off by saying the Bank thinks inflation - the rate at which prices are rising - will fall "markedly this year" but adds there are signs of it being "persistent".
On Wednesday, figures showed that inflation did not fall as expected, and remained at 8.7% in the year to May.
"I thought it was right that we took this action [to raise rates] today," Bailey adds.
Kevin Peachey
Cost of living correspondent
The next question is from Duncan Roberts - he asks how does putting up interest rates stops the massive rises inthe cost of basics, such as gas, electric and food which people can’t avoid paying for?
We have received lots of calls about this during phone-ins at the BBC on this subject.
In short, if rates are supposed to cut our spending and bring down the rate of price rises, how can this happen if all our budgets are taken up by essentials?
The counter argument is that some are getting decent pay rises and can tighten their belts. Many economists say the Bank of England doesn't have many tools to cut inflation, but interest rates is the best one, and it affects more than just consumers.
The Bank's governor, Andrew Bailey, says that inflation needs to be dealt with now, or it could get worse.
In other words, a high rate of rising prices is the greater evil.
Kevin Peachey
Cost of living correspondent
Edward Norris asks why, as a saver, he is not seeing returns rise?
I don't exactly know Edward's circumstances - none of my business, of course.
However, my guess is that his money is in an easy-access savings account.
Banks have been heavily criticised by MPs on the Treasury Committee for failing to pass on rate rises to interest rates on these accounts.
But they've hit back, saying they are paying much better returns on longer-term savings products.
Theoretically, savings rates should improve when the base rate rises but, at the same time, the purchasing power of people's savings is being diluted by rising prices.
Kevin Peachey
Cost of living correspondent
Michael in Bromley asks why it is only those with large mortgages - a relatively small proportion of the population - who are being penalised by the aim to cut inflation.
This is at the heart of a debate going on right now.
It is true that, historically, interest rate rises may have been felt more immediately by a bigger chunk of the population - making them change their spending habits.
Now, those aged in their 30s and 40s with a lot left to pay on their mortgages could face much of the pain.
However, a lot more people are impacted. For example, mortgage rate rises could hit landlords, who in turn may raise the rent for tenants.
We'll now turn to answering some of the questions you've been sending in.
Our cost-of-living correspondent Kevin Peachey is beavering away answering them right now. Stay with us as we unpick what today's interest rate rise is going to mean for our audience.
Michael Race
BBC Business Reporter
Today's rate rise will affect different people in different ways.
Mortgage holders with variable or tracker mortgages, or who are looking to secure a new fixed-rate deal, will find it costs more to borrow the money for their homes.
Those on a typical tracker mortgage will pay about £47 more a month. Those on standard variable rate (SVR) mortgages face a £30 jump. Since December 2021, that is an increase in monthly repayments of £465 on a tracker and £297 on an SVR.
First-time home buyers may find they are priced out of the market as lending conditions become tighter.
Charges will also increase for some loans and credit cards that don't have fixed interest charges, though it can take longer for higher interest rates to filter through.
But people with savings should benefit from higher interest rates and get better returns on their money - though may benefit from shopping around for rates.
The rise may also be good news for those on the cusp of retirement, who might get a better annuity rate. This determines how much guaranteed income you get, when you swap some or all of your pension pot for a secure income. That's because providers typically buy government bonds, which will rise in line with higher interest rates.
For the government though, the rise in interest rates will have a knock-on effect meaning it has to pay more interest on the country's debt, making it more expensive to spend money on things like schools and hospitals.
Image source, Getty ImagesLiberal Democrat leader Sir Ed Davey has given his reaction to the interest rate rise.
He says it will "scar family finances for years to come - all because this Conservative government crashed the economy and sent mortgages spiralling".
He argues “homeowners are being treated as collateral damage".
“Rishi Sunak needs to provide targeted support to those hardest hit, instead of cruelly standing by as people worry about keeping a roof over their head," he says.
Image source, Craig JohnstonAhead of the rate rise, we heard from Craig Johnston, from Sheffield, who separated from his partner and bought her out of the house earlier this year.
His monthly repayments are £879.72 but his two-year fixed rate deal is coming to an end in September.
The 38-year-old says he is "worried" about remortgaging and it's something that's been on his mind for a while.
“I haven’t got any savings due to the work I’m doing on the house. But I need to be preparing myself for a hit," he adds.
“Now I need to park some money away for this if I can. Try and build back up my rainy day fund.
“I haven’t got a partner or children but one income for myself, so every penny counts.”
Image source, ReutersLet's bring you some more comments now from the Bank of England governor, who says that today's rate rise was necessary to avoid potentially more severe measures later on.
Andrew Bailey says: "We've raised rates to 5% following recent data which showed that further action was needed to get inflation back down.
"The economy is doing better than expected, but inflation is still too high and we've got to deal with it."
Quote MessageWe know this is hard - many people with mortgages or loans will be understandably worried about what this means for them. But if we don't raise rates now, it could be worse later.
Andrew Bailey, Governor, Bank of England
Labour's shadow chancellor wants banks to offer support to struggling customers
Today's rate rise creates an "incredibly worrying time" for many families, says Rachel Reeves.
Labour's shadow chancellor says increased mortgage repayments will "heap even more pain on ordinary working families".
Reeves says if she was chancellor she would instruct banks to support customers, for example by moving them onto interest-only products, extending their mortgage or by halting repossessions for six months.
On state support for mortgage holders, Reeves says given the high rate of inflation, "lots of untargeted fiscal support from the government is not the right response".
Daniel Thomas
Business reporter, BBC News
Journalists were released from the Bank of England’s basement in central London after the decision and we can now access the internet and our phones again.
I’ve filed my copy and it’s online already thanks to the speed and skill of editors back at New Broadcasting House.
Meanwhile, the BBC’s economics editor Faisal Islam has been broadcasting his instant takes on the rate decision from outside the Bank.
Months on end of rising prices and increasing interest rates have left many of us feeling the squeeze on household budgets. The BBC's Tackling it Together guides bring together information to help:
Image source, ReutersJust before the Bank of England decision was announced, Downing Street said Bank of England governor Andrew Bailey had the support of Prime Minister Rishi Sunak.
But, the PM's spokesman declined to go as far as saying Bailey and the Bank had done a good job in tackling inflation, which remains high.
He adds: "The prime minister thinks is important that we continue to support the Bank in the work they are doing.
Noting there's an independent process for setting interest rates, he said "we continue to work closely with them and work well with them to bring down inflation".
Michael Race
BBC Business Reporter
Interest rates have been hiked again for the 13th time in a row, and the 0.5% increase is the biggest jump in one go since February.
But when will they start to come down? The Bank of England, which sets the UK's interest rate, says while it does expect inflation, which is the rate at which prices rise at, to fall "significantly" as the year goes on, it may well raise rates further in the coming months if prices continue to soar.
It has been forecast that interest rates could peak close to 6%, which is similar to what the expectations were after former PM Liz Truss's mini-budget last autumn.
The economic theory is that raising interest rates makes it more expensive for people to borrow and therefore they have less money to spend, meaning households will buy fewer things and then the cost of living will ease.