Next up, a reporter from the Guardian newspaper asks if the Bank's message for people is that "a certain amount of pain is inevitable".

Bailey replies by saying he "wouldn't use words like pain" - but adds that the Bank does recognise the very serious effect of inflation, particularly on the least well off.

He also says if the Bank don't bring inflation down, then ultimately the effects will be worse.

Bailey is pressed by a reporter from Channel 4 News on what has "gone wrong" with the British economy, who points to low growth, higher unemployment and persistently high interest rates.

Has the Bank "lost control", she asks?

The governor reiterates that there is cause for optimism because of falling inflation - pointing out that the outlook for that decline is "more assured" than it appeared to be in previous Bank assessments.

The economy has been "much more resilient" than some had feared. He reminds the room that last November, the Bank thought there would be a shallow recession - and that has not transpired.

He also says unemployment remains historically very low, which is more good news.

We're into the questions now, and our economics editor Faisal Islam asks whether the Bank are concerned that households may be expecting interest rates to fall - which might not happen for a while.

Bailey begins by saying the Bank's policy on interest rates is having an effect on inflation.

In order to get inflation back on target, the Bank is going to have to keep this policy stance, he says, but adds this could incorporate a lot of different paths on interest rates.

Faisal also also whether rates are close to a peak.

The Monetary Policy Committee's Ben Broadbent says the Bank cannot say exactly when the peak will be.

Dearbail Jordan
Reporting from the Bank of England news conference

We’re currently in the press conference with Bank of England Governor Andrew Bailey and deputy governors Ben Broadbent and Dave Ramsden and the joint is really jumpin’.

*Not really.

These press conferences are pretty staid affairs as reporters try very hard to translate complicated economic-speak into language that everyone can understand.

Bailey has just been challenged on if there is any good news at all today. He points to last November when the Bank was forecasting that the UK economy would fall into the longest recession on record, lasting for two years.

The economy has been more resilient, he says, and is expected to grow. But still, looking at the Bank’s updated forecast today, growth will be pretty subdued.

Concluding, Bailey says there is evidence that the significant increase in Bank rates - seen over the last few months - is having an impact.

To return inflation to the target of 2%, he says the policy needs to continue to be restrictive. This includes, for instance, increasing the base rate.

Bailey also says he won't predict what the UK's path of interest rates will be, as more than one path might work to deliver inflation back to the intended target just mentioned.

Bailey says the most likely case according to the Bank's models is that inflation is down to 1.7% in two years’ time, and falling further to 1.5% in the third quarter of 2026.

But he says there are still high risks around those projections, so rates could end up being slightly higher.

A lot of what happens to inflation in the coming years will depend on the jobs market and on pay, Bailey says, adding that private sector pay has risen more than expected in recent months.

Bailey continues by saying higher prices for services may suggest that higher inflation could persist for longer.

He adds that economic activity has shown some "unexpected resilience" recently, but says increasing bank interest rates are weighing "to an increasing degree" on economic activity.

Bailey is now showing a graph, which projects that Consumer Prices Index (CPI) inflation will fall later this year.

He puts this down to falling prices of energy - as we outlined in an earlier post.

Bailey says there's uncertainty about how long it'll take the non-energy contributions of CPI to come down - with food and non-alcoholic drinks still very high - but he says it does appear to have peaked.

Food price inflation is expected to come down "gradually" over the rest of the year, but currently remains quite high, Bailey adds.

Bailey says there has been some good news on falling inflation in recent months and that should continue.

The Bank's job is to get the rate back to the 2% target and make sure it stays there, he says.

Bailey says low inflation is a sign of a healthy economy, while high inflation hurts the least well off.

We're now hearing from the Bank of England's Governor Andrew Bailey.

We'll be covering the press conference live here - you can watch it by clicking the Play button at the top of this page.

Here's a picture from our reporter in the room, Dearbail Jordan.

Some more now on the Bank's general predictions for the UK.

In a report, released today, it says the recent easing of price rises has been driven largely by a drop in international energy prices - set to reduce the average UK household's energy bill to below £2,000 a year by October.

But it also warns that food price inflation, "which has a particularly large impact on the living costs of lower-income families due to it making up a larger share of these families' budgets", remains "extremely high".

It's not all bad news, though.

The Bank says it expects annual food inflation to fall to around 10% by the end of the year.

The current official inflation rate for food is 17.3%.

Here are some words from Bank of England Governor Andrew Bailey.

"Inflation is falling and that's good news," he says.

"We know that inflation hits the least well off the hardest and we need to make absolutely sure that it falls all the way back to the 2% target - that's why we've raised rates to 5.25% today."

We are expecting to hear more from Bailey soon.

The last time interest rates in the UK were at 5.25% was in April 2008 - they were cut that month to 5%., external

As well as the decision on rates, the Bank of England has also released its quarterly Monetary Policy Report today. It sets out the Bank’s expectations for the UK economy.

In the report, the Bank says UK inflation is expected to drop below 5% by the end of 2023 - meaning Prime Minister Rishi Sunak would meet his much-publicised target of halving inflation by the end of the year.

The Bank predicts the Consumer Prices Index (CPI) inflation will fall to 4.9% in the final quarter and remain above 2% until mid-2025.

The Liberal Democrats have also had their say, with the party's Treasury spokesperson Sarah Olney MP urging the prime minister to take "concrete action now".

She said:

Image source, PA Media

Labour's shadow chancellor Rachel Reeves says the rise in interest rates is "incredibly worrying for households across Britain already struggling to make ends meet".

She goes on to say: "Responsibility for this crisis lies at the door of the Conservatives that crashed the economy and left working people worse off, with higher mortgages, higher food bills and higher taxes."

Image source, PA Media

We've just had Chancellor Jeremy Hunt's reaction to the news that the UK's base rate has been raised to 5.25%.

Remember: one of Prime Minister Rishi Sunak's five pledges - which he set after taking office - is to halve inflation by the end of the year.

This would mean the figure falling to around 5%.

Nine people are on the Monetary Policy Committee, which decides the interest rate.

Six of them voted to increase the base rate by 0.25 percentage points to 5.25%.

One voted to keep at 5%, while two members wanted it increased to 5.5%.

Rates now close to their peak in this cycle of 14 risespublished at 12:06 British Summer Time 3 August 2023

12:06 BST 3 August 2023

Faisal Islam
Economics editor

Don’t expect rates to fall any time soon, but they may not go up much more from here.

That is what is indicated by the Bank of England’s important new language today.

The words are as important as its deed - raising rates for a 14th consecutive time. The Bank had picked up that some households and some in markets were assuming that once inflation had tumbled to more normal levels, that interest rates too would fall.

By stating that it will “ensure that Bank Rate is sufficiently restrictive for sufficiently long”, the MPC is clearly indicating that rates could plateau above 5% across next year into 2025.

However it is also implicitly acknowledging that at 5.25%, rates are now close to their peak in this cycle of 14 rises.

This mixed view reflects some mixed data. Today’s quarter point rise and the fact that rates will stay high for some time is to temper inflationary pressure emerging from the jobs market, a less weak economy, and the service sector.

As the Bank concludes, “some of the risks of more persistent inflationary pressures have begun to crystallise”.

A rise to 5.25% is a smaller increase than July's dramatic rise to 5% from 4.5% - and follows signs that price rises have begun to ease.