The decision by the nine-member monetary policy committee was unanimous and financial markets are still pricing in three further rate hikes by the end of next year.

This is the first rise since 3 August 2023 when Bank Rate was raised to 5.25% and had been strongly signalled.

Consumer price inflation jumped to 3.5% in September, up from a mid-year low of 2.6% in June, taking it well above the official 2% target. The Bank of England expects inflation to climb still higher – to above 4% early in 2027 – as spikes in energy costs feed through in the next few months.

Andrew Bailey, the Bank’s governor, said the decision “shouldn’t be seen as the first in an inevitably long sequence of hikes”, but warned “unless the conflict in the Middle East is resolved, neither does it seem likely to be the last increase”.

Joe Nellis, head of economic research at MHA, the accountancy and advisory firm, said: “The battle against inflation has entered a new and more challenging phase as we head towards 2027.”

Chancellor John Healey said: “The Iran conflict is reaching deep into the pockets of families and businesses here at home.  

“In my Budget I acted to give some breathing space to families and businesses. Twenty million households will get a £100 energy payment, I extended the tax cut on electricity bills and froze fuel duty. 

“I also set out the course ahead to get costs down for good. That includes big changes to our energy system so Britain is better protected from global shocks in the future.”