The Bank of England has announced a pre-Christmas interest rate hike from 0.1% to 0.25%.
Officials have been under pressure to act to curb cost of living increases though calls for a hike have been dampened by the arrival of the Omicron wave of COVID-19 and fears over its likely economic impact.
The Bank had signalled that last month’s decision not to raise rates was a close call, heightening expectations of a December move.
Figures showing a bigger than expected leap in inflation to 5.1% in November added weight to the argument for a hike, and the International Monetary Fund (IMF) earlier this week urged the Bank to avoid “inaction bias” over rates.
Members of the Bank’s rate-setting monetary policy committee (MPC) voted 8-1 for the increase.
They acknowledged that the Omicron variant “is likely to weigh on near-term activity” but judged that “its impact on medium-term inflationary pressures is unclear at this stage”.
Silvana Tenreyro, the MPC member who voted against a hike, had argued however that “the significant uncertainty introduced by Omicron warranted waiting until February for more clarity before considering any change”.