Cost of living crisis: Bank of England set to increase interest rates to levels not seen since 2008

The Bank of England is expected to unveil the biggest interest rate rise since the 1980s today.

A hike of 0.75 percentage points is anticipated – pushing the base rate to 3%, levels that have not been seen since 2008.

If confirmed, this could push up mortgage bills for millions of people in the coming months.

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This would also be the eighth time in a row that the Bank of England has hiked interest rates. Less than a year ago, the base rate was just 0.1%.

Earlier this month, the markets had predicted that today’s increase could be one whole percentage point – but sentiment has calmed since the mini-budget was reversed and Liz Truss resigned as prime minister.

The Bank of England is also set to release long-term inflation forecasts, which are expected to show that the cost of living next year will be much higher than its target of 2%.

Official figures released in September showed inflation hit 10.1% – matching a 40-year high seen in July – with much of this increase driven by rising food costs.

Through these rate hikes, the Bank of England is trying to bring core inflation under control, which excludes more volatile elements such as petrol and energy prices.

Analysts at Deutsche Bank have warned they expect the BoE’s forecasts to show “the economic outlook has deteriorated further”, adding: “Conditioned on market pricing, the UK economy will likely fall into a deeper and more prolonged recession.”

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