Bank of England policymakers have agreed to raise interest rates from 0.1% to 0.25%.
The bank's nine-person monetary policy committee (MPC) voted eight to one in favour of the rise as inflation continues to grow beyond target levels. Only Silvana Tenreyro did not support the rise.
Meanwhile the bank will continue its £895bn quantitative easing programme after the MPC voted unanimously in favour.
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The bank said consumer price inflation “has risen more than expected”.
But officials said they had revised down their expectations for the levels of UK GDP in the fourth quarter by some 0.5% since the previous Bank meeting, leaving GDP around 1.5% below its pre-Covid level.
The level of global GDP in the fourth quarter of 2021 is still expected to be similar to last month’s projection.
Meanwhile the Omicron Covid variant is likely to hit economic activity next year.
The bank said: “Growth in many sectors has continued to be restrained by disruption in supply chains and shortages of labour,” it added.
“The impact of the Omicron variant, associated additional measures introduced by the UK Government and Devolved Administrations, and voluntary social distancing will push down on GDP in December and in 2022 Q1.”
