The Bank of England has increased the interest rate from 0.1% to 0.25% in a bid to rein in rampant inflation.
The decision has been made despite mounting fears over the impact of the Omicron variant of coronavirus.
It comes following pressure to bring the soaring cost of living under control, with official figures this week showing the consumer prices index jumped to 5.1% – the highest level for more than a decade.
Rates had been at 0.1% since March last year, when the Bank moved to prop up the economy in the early days of the pandemic.
The rise marks the first rates increase since August 2018 and just the third since the financial crisis.
In the minutes of the decision, the Bank warned that inflation could now peak at 6% in April, while it also downgraded growth outlook to 0.6% in the fourth quarter from a previous forecast of 1%.
The minutes said: “Most members of the Committee judged that an immediate, small increase in Bank Rate was warranted.
“The decision at this meeting was finely balanced because of the uncertainty around Covid developments.
“There was some value in waiting for further information on the degree to which Omicron was likely to escape the protection of current vaccines and on the initial economic effects of this new wave.
“There was, however, also a strong case for tightening monetary policy now, given the strength of current underlying inflationary pressures and in order to maintain price stability in the medium term.”
STV News is now on WhatsApp
Get all the latest news from around the countryFollow STV News
Follow STV News on WhatsApp
Scan the QR code on your mobile device for all the latest news from around the country