The market is pricing in a 25 basis point rise in interest rates, ahead of the Bank of England’s (BoE) monetary policy meeting later this week.

This would take the rate to 0.50%, where it last sat in November 2017.

The Monetary Policy Committee will meet on Thursday, (3 February) and it is widely anticipated that it will result in a second increase following the 25 basis point rise in December.

Dashly chief executive Ross Boyd says: “The BoE’s mandate is to keep inflation at 2%, so with inflation now significantly higher it has no choice but to raise rates this week. If the bank doesn’t get a grip on inflation soon, the entire UK economy could unravel.”

Longer term, the market expects rates to hit 1% by the summer, and 1.25% by the end of the year as the central bank takes action to curb inflation.

Hargreaves Lansdown’s personal finance analyst Sarah Coles, says that for the BoE to do nothing this week would be “incredibly difficult” with inflation now at a 30-year high.

Earlier this month, Office for National Statistics data showed that the cost of living increased by 5.4% in December, the highest figure seen since March 1992.

Coles adds: “Whether it will have the desired effect on inflation remains to be seen. It’s difficult to see how it will control some of the biggest price rises – including energy and petrol – which are driven by global supply problems. However, it will make many borrowers worse off, which could help temper inflation in some areas.”

Bolton Business Finance managing director Marcus Wright says that another small rise would be fully justified.

“Inflation poses a real risk to our post-Covid economic recovery and cannot be ignored anymore.”