The 50 basis points increase to 1.75% will be the largest interest rate in 27 years and will speed up a historic tightening of monetary policy to tackle the highest level of inflation experienced in four decades.
In June, inflation reached 9.4%, with the BoE predicting it will rise again to 11% before the year ends.
In a comment, BoE governor Andrew Bailey said, “The Committee will be particularly alert to indications of more persistent inflationary pressures, and will, if necessary, act forcefully in response. Bringing inflation back down to the 2% target sustainably is our job, no ifs or buts.”
The BoE has already raised interest rates on five occasions in the past seven months — a record amount that is putting substantial pressure on people who have borrowed funds.