Bank of England is set to hike interest rates by 0.25% TODAY

The Bank of England is set to raise interest rates for the fifth month in a row, causing more cost-of-living hardship for Britons.

As it scrambles to reign in excessive inflation, the Monetary Policy Committee is set to raise the base rate by 0.25 percentage points to a new 13-year high of 1.25 percent.

The Bank of England is set to raise interest rates for the fifth month in a row, causing more cost-of-living hardship for Britons.

As it scrambles to reign in excessive inflation, the Monetary Policy Committee is set to raise the base rate by 0.25 percentage points to a new 13-year high of 1.25 percent.

After bleak numbers this week revealed the UK economy is already in reverse, mortgage-payers are set to be spared an even larger hike – which many analysts had predicted could be 0.5 percentage points.

The announcement came only hours after the US Federal Reserve raised interest rates by 0.75 percentage point, the largest increase in decades, as it grapples with similar issues.

If the Bank of England rate rises to 1.25 percent as projected, it will be the first time it has been above 1% since January 2009.

Meanwhile, Lord King, a former governor, has encouraged Boris Johnson to be honest with the public about the ‘inevitable’ decline in living standards.

He said the crisis will be ‘reminiscent of the 1970s’ and suggested the PM has to be honest about what is happening.

‘Our leaders need to give us a clear narrative explaining why recent events will inevitably lower our national standard of living, how that burden will be shared, why it is important to bring inflation down, and why measures to raise economic growth and reduce regional disparities will take many years to come to fruition but will work only if we make a start now,’ he wrote in The Spectator.

The nine-person MPC includes governor Andrew Bailey, two deputy governors – Sir Jon Cunliffe and Ben Broadbent – and chief economist Huw Pill.

With headline CPI inflation forecast to reach double-digits by the end of the year, the MPC has voted for a rise in each of the last four meetings, in December, February, March and May.

However, it has been criticised for not responding quickly enough to rising prices and the overheating labour market.

Last time three out of nine members of the Monetary Policy Committee already voted for rates to be set at 1.25 per cent.

However, some things have changed since then. The UK economy looks set to struggle, with an OECD forecast predicting it will be the weakest in the Group of Seven (G7) next year.

The Chancellor, who is planning to transfer billions to suffering households to help them deal with skyrocketing energy prices, has given the Bank a little more leeway.

Because the cost of borrowing will rise for homeowners, an increase in interest rates will eat into some of this giveaway.

A raise, on the other hand, will favor savers.

‘The internal block — Bailey, Broadbent, and Pill – will very certainly vote to raise Bank Rate by 0.25 percent this month,’ according to Samuel Tombs, chief UK economist at Pantheon Macroeconomics.Bank of England governor Andrew Bailey is set to announce the interest rates decision at noon today

‘And given that some members thought last month that the guidance regarding further rises in interest rates was obsolete, we expect to see at least one of them, most likely Cunliffe, to vote for no change.

‘With markets currently pricing in a 34bp increase in Bank Rate this week and a further 41bp rise for the August meeting, we expect both rate expectations and sterling to drop in the wake of this week’s meeting.’

Laith Khalaf, head of investment analysis at AJ Bell, said: ‘The Bank of England faces a stern test of its mettle at the next interest rate decision, and any hesitation is likely to result in the pound being punished on the currency markets.’

Such a drop would mean that the price of petrol and diesel, and other imports that the UK pays for in dollars, would rise.

This month, the average price of filing a family car topped £100 for the first time.

‘By raising interest rates, the Bank is putting the brakes on an economy that is already slowing of its own accord,’ Mr Khalaf said.

‘That risks the economy stalling, or worse, going into reverse.’

GDP was down for the second month in a row in April after a 0.1 per cent dip in March, underlining the 'Stagflation' threat as inflation soars