The Money Policy Committee voted 7-2 in favour of keeping the base rate at 0.1%.

The Bank is adopting a cautious strategy but has indicated that rates could rise to 1% next year and inflation could top 5% in April. Much will depend on inflation and the growth of the economy.

In a press conference after the base rate announcement, Bank of England Governor Andrew Bailey said bank expectations were that inflationary pressures would ease in the second half of 2022 but CPI could average above 2% for the next two years. He said much depends on energy prices.

Some economists had been calling for a base rate rise to 0.25% now to curb rising inflation but the Bank has rejected these calls - for now.

The announcement comes amid a backdrop of rising inflationary pressure, with inflation well above the Bank's 2% target.

CPI is currently 3.1% and Chancellor Rishi Sunak recently warned it would average 4% next year.

The Bank of England said recently that developments over the past month have strengthened the case that some tightening of monetary policy may be needed to meet the bank’s 2% inflation target.

Ben Kumar, senior investment strategist at 7IM, said: “Despite no movement on interest rates today, all signs point towards a rate hike on the horizon as the BoE starts to consider options to get inflation under control. We have seen temporary inflation increases beyond expectations in the UK, which is likely to have moved the timeframe for rate rises forward. As we’ve been saying for a year or so, investors should be preparing for a decade in which inflation is more of a challenge to their portfolios.

“We believe that investors should look to the higher yielding areas of fixed income and towards alternatives. As interest rates grind up government bonds will still protect portfolios but they still aren’t going to generate much in the way of returns. Investors should be looking for opportunities now that are designed to do well in rising-rate environment, even if the prospect of rate rises is far in the future as it is only a matter of when, not if. Being positioned to be underweight in government bonds, overweight in alternatives, overweight in value and underweight in tech are good examples of what investors can do to start preparing for rising interest rates.”

• This is a breaking news story and will be updated with reaction during the course of the day.