The Bank of England signalled strongly in the minutes of its latest meeting on Thursday that interest rates will soon rise – possibly as early as November.
But what does this mean, in practical terms, for British families and firms?
A hike in rates by the central bank traditionally means an increase in people’s monthly mortgage repayments.
And people on tracker mortgages – where repayments vary with the Bank of England’s base rate – will rapidly be made worse off from a Bank of England rate rise.
Britain needs higher interest rates to prevent inflation from heading back towards 3% and staying there for several years, according to Michael Saunders, one of the two dissenting Bank of England rate-setters to vote for a rise earlier this month.
Saunders said the UK economy was able to withstand the impact of higher credit costs after a steep fall in unemployment that paved the way for an increase in wages and higher prices in shops.
In a speech to business leaders in Cardiff, Saunders said he recognised that Brexit uncertainties weighed on consumer and business confidence, but warned that the decreasing number of migrant workers, which was already affecting some industries, would add to the pressure to raise wages