As widely predicted by economists, the quarter point rise is the monetary policy committee’s fourth increase since November last year.
Analysts predict rates could rise to 5% by the end of the year.
The move will mean that millions of homeowners face higher mortgage bills from today if lenders pass on the full hike in rates.
Despite the monetary policy committee’s gradualist approach, economists suspect that booming house prices are a major factor in the decision.
But in a statement from the BoE, the decision was put down to inflationary pressures.
‘The committee judged that a further increase of 0.25 percentage points in the repo rate to 4.5% was necessary to keep CPI inflation on track to meet the target in the medium term,’ said the BoE.
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