This would also be the eighth time in a row that the Bank of England has hiked interest rates. Less than a year ago, the base rate was just 0.1%.
Earlier this month, the markets had predicted that today’s increase could be one whole percentage point – but sentiment has calmed since the mini-budget was reversed and Liz Truss resigned as prime minister.
The Bank of England is also set to release long-term inflation forecasts, which are expected to show that the cost of living next year will be much higher than its target of 2%.
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Official figures released in September showed inflation hit 10.1% – matching a 40-year high seen in July – with much of this increase driven by rising food costs.
Through these rate hikes, the Bank of England is trying to bring core inflation under control, which excludes more volatile elements such as petrol and energy prices.
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Analysts at Deutsche Bank have warned they expect the BoE’s forecasts to show “the economic outlook has deteriorated further”, adding: “Conditioned on market pricing, the UK economy will likely fall into a deeper and more prolonged recession.”
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2:22
‘Black hole’ in finances explained
Firms face ‘desperately difficult decisions,’ Labour warns
This afternoon, Labour’s shadow chancellor will warn that the latest interest rate rise will have a huge impact on consumers and companies alike.
Speaking at the Anthropy conference in Cornwall, Rachel Reeves will say: “Rising interest rates will mean families with already stretched budgets will be hit by higher mortgage payments. It will mean higher financing costs for businesses.
“For many firms who have had a tough couple of years, this will mean desperately difficult decisions about whether to carry on.
“And it will mean profound implications for growth as demand is sucked out of the economy – and even those firms that are keeping their head above water face difficult decisions about whether to invest or expand.”
Yesterday, a new poll carried about by Ipsos for Sky News revealed that more than a quarter of people have started using their credit cards to buy food – and a fifth have borrowed money to adjust to rising prices this year.
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2:21
People putting food bills on credit
US also increases interest rates
The Bank of England’s decision will come a day after America’s central bank, the Federal Reserve, also confirmed that it will increase interest rates by 0.75 percentage points.
Wall Street fell sharply when Fed Chairman Jerome Powell suggested the US base rate may need to go even higher than previously thought to tackle the worst inflation seen in decades.
He warned: “It’s very premature, in my view, to think about or to be talking about pausing our rate hikes. We have a ways to go.”
Mr Powell also said that the Federal Reserve would rather make a mistake of taking interest rates too high than easing too quickly, amid fears that a premature pullback could cause inflation to remain.
People whose homes have been destroyed by the floods sweeping across parts of the UK over the past couple of days have been telling Sky News how they coped with the deluge.
In Lincolnshire, where a major incident has been declared, Terry, from Grantham, showed a Sky crew the aftermath of the deluge in his home, which was left under two feet of water.
“Everything’s gone,” he said, adding that he was “devastated”.
The first sign of trouble came at lunchtime on Monday, when his wife woke him and said there was water coming in [to the house], and “within a few minutes, the whole house was flooded”.
They rushed their belongings and pets upstairs, he said, as he revealed the damage to the flooded living room and kitchen, where the water mark was above a power socket.
Terry said the kitchen, where the floor was covered in sludge, smelled of mud and sewage, and their furniture and carpets were wrecked.
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They have no electricity and the food in the cupboards and freezer was “completely ruined”.
Graham Johnson, who lives in a boat with his wife and dog, in the village of Barrow upon Soar in Leicestershire, was in the pub on Monday night, before the water started to rise “rapidly”.
People living in a local caravan park were moved as a severe flood warning was issued.
Mr Johnson said he had gone out “for a couple of pints as usual and, the next thing we know, bingo”.
The couple feared their boat home was about to be swept towards the bridge.
“That’s our pride and joy, where we live, and we didn’t want to lose it,” he said, as he praised the “fantastic” emergency services, who rescued them and their dog after a nervy three-hour wait.
They were two of the 59 people rescued by firefighters in the county, where a major incident was declared and crews were called out to 160 flood-related incidents, the Fire Brigades Union (FBU) said.
Another Leicestershire resident whose home was inundated was Qasim Abdullah from Loughborough.
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0:53
Flooding across East Midlands
Pictures taken by the Associated Press show him walking through almost knee-deep water in his living room.
In nearby Quorn, businesses have shut as the main high street has flooded for the second time in as many years.
Two of the pubs in particular have been damaged.
Last year, residents had to launch a crowd fundraiser to help pay for the costs of renovation. Not to mention soaring insurance premiums.
Indy Burmi, who owns a hair salon and restaurant, hasn’t suffered flooding, but said he’s had to close up and cancel all Tuesday’s reservations, as his clients simply can’t get into the village.
And, with more rain forecast, conditions could get even worse in the short term, while residents worry that an annual battle with rising water is now the new normal.
Elsewhere in the UK, the next danger is from ice forming on untreated surfaces after rain on Tuesday evening, the Met Office has said, as it issued a new warning for northern England and Wales from 5pm until midday on Wednesday.
The Royal Liverpool University Hospital has declared a critical incident due to “exceptionally high” demand on A&E and patients being admitted to wards.
The hospital said there had been a spike in people with flu and respiratory illnesses going to emergency departments in recent weeks.
A spokesperson for the hospital said it had a “comprehensive plan in place” and was “taking all the necessary actions to manage the challenging circumstances”.
“We are working with partner organisations to ensure those that are medically fit can leave hospital safely and at the earliest opportunity,” they added.
The hospital warned some people would experience delays as it prioritises the sickest patients.
People whose case isn’t an emergency are being asked to see their GP, pharmacy or walk-in centre – or call the 111 service for advice.
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The Royal Liverpool University Hospital is in the city centre and is the biggest hospital in Merseyside and Cheshire.
Declaring a critical incident can happen when a hospital is experiencing exceptional demand, or sometimes if there is a serious problem with staffing levels.
It indicates it can’t function as normal and allows it to take extra measures to protect patients, such as prioritising the most unwell people and getting support from other agencies.
It could last hours, a few days, or weeks if necessary.
A critical incident was also declared on Friday by the NHS Cornwall and Isles of Scilly Integrated Care Board.
It said it had seen almost four times as many inpatients compared with last year and urged people with flu to avoid going to A&E.