Members of the Bank's Monetary Police Committee, which decides on base rates, voted by 6-3 to increase the rate, suggesting some difference of opinion on the right strategy.

The three minority members wanted a bigger rise of 0.5% to push up the base rate to 1.5%, the MPC said.

The latest base rate rise is the fifth in a row for the Bank, which had previously held rates steady for three years.

Inflation concerns continue to paramount and the Bank says it is possible that CPI inflation could top 11% by October. It is currently 9% although recent forecasts have suggested a steady but slow decline next year.

The inflation target remains 2%, the Bank reiterated.

Financial Planners said they expected the base rate may rise further this year but it will have less of an impact on clients than soaring inflation.

Philip Dragoumis, owner for Financial Planning firm Thera Wealth Management, said: "The Bank of England has been behind the curve on inflation, and should have raised rates earlier. The level of inflation has caught them completely unaware.

"Raising rates, however, will have less of an impact as UK inflation is being driven largely by external factors such as energy, tight supply chains and Brexit, which has made hiring more difficult, increasing wages. Higher rates should, however, serve to cool the housing market. Except for Brexit, the other factors are transitory and inflation should come down over the next two years to 2% (as forecast by the Bank of England). The UK, however, has a tough economic outlook given the political situation and the effects of Brexit, and we will continue to see Sterling under pressure.

"Hence we stick by our preference for global allocations and would not want a UK weighting higher than 5% in a global equity portfolio, in line with global equity indices."

David Robinson, co-founder and Chartered Wealth Manager at London-based Wildcat Law, said he would rather have seen some contrarian thinking from the Monetary Policy Committee.

He said: "We appear to be locked in a vicious spiral that is more dangerous than the global financial crisis. Stagflation is being whispered about by many in the city. Raising interest rates at this time threatens companies that were already weakened by the global pandemic. The rising cost of debt combined with inflation risks forcing many businesses under, which at some point will impact the labour market. As much of our inflation is imported you have the seeds of a perfect storm.

"We require some bold, contrarian thinking by the Bank of England, but unfortunately Andrew Bailey (Governor) is unlikely to provide this. He appears happy to go down with the ship shouting 'I told you so'."

Rob Clarry, investment strategist at Evelyn Partners (formerly known as Tilney Smith & Williamson), expects the Bank of England to press pause on rate rises later this year.

He said: "The Bank of England faces an unenviable challenge. With inflation reaching a forty year high of 9% in April and sterling recently hitting a two-year low against the dollar, the MPC needed to act to reduce price pressures and support the currency.

"However, recent disappointing growth data meant that the MPC refrained from raising interest rates by 50 basis points. The UK economy recorded a 0.3% contraction (month on month) in April, which contrasted with the Bank’s positive growth forecast. Meanwhile the services and manufacturing PMIs ─ bell weathers for economic activity ─ fell sharply in May, signalling further challenges for the economy.

"Ultimately, as UK economic activity continues to slow, we view that the market remains too hawkish in its assessment that rates will continue to increase throughout the year. Instead, we think the Bank of England will be forced to hit the pause button later this year to prioritise growth over fighting inflation."

Martin Brown, managing partner at national advisory firm Continuum, said he expects the base rate rise to have a "quick and strong impact" on Financial Planners' clients, particularly the retired.

He said: "Rate rises and other measures to tackle inflation mean complications for many aspects of Financial Planning, but particularly for pensions. A client’s pension needs to last the whole of their retirement, which could easily be 20 years long or more, and be enough to pay for care if they need it.

"With further rate rises seeming likely in the near future as the Bank of England continues to attempt to tackle rampant inflation, the best step those affected can take is to seek independent financial advice."

Les Cameron, financial expert at M&G Wealth, said: "While today’s announcement is no surprise, what remains to be seen is whether this rise will translate to higher rates available to savers or to increased borrowing costs.

"With the current high levels of inflation we’re experiencing, a modest increase to savings rates would still mean that most cash or near-cash savers, for example National Savings & Investments, would see their wealth being eroded in real terms. Of course, many of those with cash savings are pensioners who spend a higher proportion of their savings on energy costs, which we know are increasing at a much higher rate even than the headline inflation rates. The increasing cost of living will mean those repaying debt, that is not on a fixed rate, will no doubt feel the pinch even more if rates rise."

• The Bank of England has moved to a 6-8 week cycle for bank base rate announcements, it confirmed to Financial Planning Today. The next base rate will be announced on 4 August. In future base rate announcements will be approximately 8 times a year.