The increase marks the first time that the bank’s Monetary Policy Committee (MPC) has risen the rate in more than three years.

The latest figures published by the Office for National Statistics (ONS) show that the cost of living in the UK rose by 5.1% in the year to November, marking the highest rate since September 2011 and above the bank’s 2% inflation target.

Kevin Brown, savings specialist at Scottish Friendly, commented: “The Bank of England has decided that action must be taken now to try and strengthen the pound and quell the rising cost of living.

“The wolves are at the door and although Omicron risks destabilising the UK economy, today’s decision is evidence that the Bank views inflation as the most immediate threat.

“There were concerns that the Bank may wait to assess how much damage Omicrom does to the UK economy over the coming weeks before making a final decision on interest rates, but the jump in inflation in November has forced its hand.

“The question is whether raising rates to 0.25% will be enough to start driving down inflation as we head into 2022 or will they need to go higher? We would expect the Bank to make further incremental increases over the next 12 months but much will hinge on how the economy performs in the first half of next year.”

He added: “In the meantime, savers should see some minor improvements in the rates of interest on offer but investing may be a better option for anyone looking for the potential to generate above-inflation returns.

“For most households, today’s hike won’t make a huge difference to the pound in their pocket and families should keep a watchful eye on their finances to ensure they don’t get caught out by rising prices in the weeks and months ahead.”

Martin Beck, senior economic advisor to economic forecaster the EY ITEM Club, added: “The outcome of December’s Monetary Policy Committee (MPC) meeting had appeared to be on a knife-edge: the strength of recent labour market data pointed to a rate increase, but the uncertainty caused by the emergence of the Omicron variant supported a ‘wait-and-see’ approach. That the margin in favour of a rate increase was as comprehensive as 8-1, was surprising.

“This represents a significant change of approach from the MPC. Previously during the pandemic, the committee had talked about the importance of risk management.”

He continued: “A 15bp rise in Bank Rate still leaves rates well below pre-pandemic levels, and the removal of emergency policy support does seem to be a key justification of the MPC’s actions. The EY ITEM Club expects the impact on the economy to be small, particularly given the decline in the share of households with a mortgage and growth in the popularity of fixed-rate mortgages over the last few years. That said, the fact that this is the first rise in a long time does give it a greater degree of psychological importance.

“The near-term outlook for interest rates will be heavily dependent on how the Omicron situation evolves. Despite the decision to raise Bank Rate, the MPC is clearly concerned and expects the new variant to weigh on activity in the near term. This probably means the committee will avoid another rate rise in February. But, if it’s proven that Omicron hasn’t had a material impact on growth, the EY ITEM Club expects another increase in Bank Rate to 0.5% in May, before the policy rate returns to its pre-pandemic level of 0.75% by the end of next year.”