The decision on the rate rise was opposed by three members of the monetary policy committee who argued for a 0.5% increase in the rate. The US Federal Reserve has taken even starker action to stem rising inflation with a 0.75% increase in rates to 1.75% announced yesterday.

In the UK, the announcement follows the April inflation figure of 9%, which has increased significantly this year as a result of the energy crisis and soaring food prices, making the rate the highest for 40 years.