The Bank of England Monetary Policy Committee (MPC) has raised the Bank Rate to 0.5% amid increasing inflation and the rising cost of living.

In one of the most split votes in recent history, the MPC decided by five votes to four to raise the Bank Rate from 0.25%.

Four members sought an increase to 0.75%.

Frances Haque, Santander UK’s chief economist, said: “With inflation continuing to surprise to the upside and with the labour market remaining tight with record levels of vacancies, the MPC’s decision was in line with market and other forecaster views.

“Although the impact from Plan B restrictions will have had a negative effect on growth, the short duration of the restrictions has meant that the MPC could have more confidence in the economy sustaining another rate rise immediately after the last increase.

“The question now, is when any further hikes in rates will materialise which will remain heavily dependent on the path of inflation following the forecast. The MPC has provided previous guidance that rate hikes will move in small increments, and they will be mindful of choking any recovery, particularly as growth forecasts are starting to be cut for 2022 as the rising cost of living starts to bite.”