In response to calls to combat surging price rises, the Bank of England raised interest rates for the first time in more than three years.
The increase to 0.25 percent from 0.1 percent came after data this week showed that prices were rising at the fastest rate in ten years.
It was announced despite concerns that the Omicron variant would slow the economy by causing people to spend less.
The Bank’s action is expected to raise mortgage rates for some homeowners.
Bank governor Andrew Bailey stated that the economy was facing significant inflationary pressures.
Inflation has reached 5.1 percent, the highest level in a decade, and he expects it to rise further early next year.
“We think it can get to around 6% in the short term – that is, in the next two or three months,” he told the BBC.
A rise in wholesale gas prices is still a major driver of inflation, and this is pushing up domestic energy bills.
However, one business group claimed that the interest rate hike would have little effect on price increases because costs were being driven up by global factors that were largely beyond the Bank’s control.
The Bank of England has the authority to raise interest rates in order to help control price increases, but many experts expected it to do so because of the uncertainty surrounding Omicron.
However, it stated on Thursday that global asset prices, such as stocks and bonds, had largely recovered following an initial drop caused by news of the new variant.
Successive waves of Covid also appeared to have had less of an impact on economic growth, according to the Bank, though there was uncertainty about how much that would be the case this time.
“Consumer price inflation in advanced economies has risen faster than expected,” according to the Bank.
According to the Bank, the Omicron variant could reduce economic activity early next year, though it was unclear how much of an impact it would have on global inflation.