The interest rate has increased for the third time in four months as the Bank of England tries to calm the rise in the cost of living.
The rise from 0.5% to 0.75% means the rate is now at its highest level since March 2020, when Covid lockdowns began.
Energy bills and food costs are increasing and there is concern the war in Ukraine will push prices up further.
The members of the Monetary Policy Committee (MPC) felt that "given the current tightness of the labour market, continuing signs of robust domestic cost and price pressures, and the risk that those pressures will persist", an interest rate rise was justified.
The Bank has warned inflation may reach 8% and possibly higher, in the coming months.
Explaining why it had lifted its forecast, it said that the invasion of Ukraine by Russia "has led to further large increases in energy and other commodity prices including food prices.
"It is also likely to exacerbate global supply chain disruptions, and has increased the uncertainty around the economic outlook significantly," it added.
FTSE 100
Meanwhile, the UK's top share index had another good day yesterday, finishing up 93 points at 7,385.
Shortly after trading started today, it hit the 7,400 mark after rising by 15 points.
The futures price for Brent oil was up 2.26% at $109.05 a barrel this morning.
Companies reporting today
- Full-year results: ContourGlobal, Essentra, Eurocell
- Interims: JD Wetherspoon
- Q3 trading update: Investec