Interest rates in the UK have risen for the first time in three years in a bid to tackle inflation sparked by Omicron variant Covid fears.

The Bank of England’s monetary policy committee (MPC) of nine members voted eight to one in favour of increasing interest rates to 0.25% from 0.1%.

The central bank said all committee members other than Silvana Tenreyro supported the increase, as inflation continues to soar beyond its target rate.

Meanwhile, the central bank will also keep up its £895 billion quantitative easing programme after a unanimous vote in favour.

South Wales Guardian: (PA)(PA)

The MPC has said that the level of global GDP in the fourth quarter of 2021 is still expected to be similar to last month’s projection, but that consumer price inflation “has risen more than expected”.

It added that the Omicron variant of coronavirus – which has spread rapidly over the past month – poses downside pressure on economic activity at the start of next year.

Bank officials said they have now also revised down their expectations for the levels of UK GDP in the fourth quarter by around 0.5 per cent since the previous Bank meeting, leaving GDP around 1.5 per cent below its pre-Covid level.

In the minutes of the decision, the Bank warned that inflation could now peak at 6 per cent in April, while it also downgraded growth outlook to 0.6% in the fourth quarter from a previous forecast of 1 per cent.

It 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.”

Rates had been at 0.1 per cent 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.