What does this mean for my mortgage?

If the Bank Rate increases to tackle inflation, this would serve as a blow to the millions of households currently on their mortgage lenders’ standard variable rates, tracker deals or nearing the end of fixed-rate loan.

About two million households have some form of variable mortgage. Some 850,000 are on tracker-rate mortgages that will rise or fall in line with any Bank Rate change. These deals are less likely to carry early repayment charges, so borrowers may benefit from switching to a fixed-rate deal.

Around 1.1 million customers are on standard variable rate mortgages, according to banking body UK Finance. Banks are not obliged to move standard variable rates in line with Bank Rate, but typically do. Some banks, such as Santander and Barclays, immediately announced their standard variable rates would rise after Bank Rate went up this month.

These deals can be switched at no cost. Many customers would benefit from locking into a cheaper fixed-rate deal.

Will inflation harm my investments?

Bond owners could suffer the most from rising inflation. Investors sell bonds, which pay a fixed return, when inflation rises as it eats into the real value of the income. A Bank Rate rise would also be bad news for bonds as it decreases the relative value of their payments versus newly-issued bonds.

Investors can protect themselves by buying index-linked bonds, where interest paid rises in line with inflation.

Companies which have strong pricing power, such as utilities or large consumer brands, should be able to carry on with business as normal. However, inflation could be bad for retailers, such as supermarkets, which may lack the ability to increase prices. 

Infrastructure and real estate investments often have contracts linked to inflation, so their income and dividends would rise as inflation does. Gold could also rise in value as it is known as a traditional inflation hedge. However, the precious metal pays no income so may also fall in value if interest rates rise rapidly and safe government bonds become more appealing to investors.

What will it mean for household bills?

Households are protected from spiralling energy costs by the energy price cap. This climbed 12pc this year to £1,277, and is expected to climb next year to around £2,000, a 57pc jump.