The Bank of England has surprised analysts by raising the UK's base interest rate by a quarter of a percentage point to 5.25% - the third such rise in five months.
Most experts had not expected the Bank to move this month
Here are some of the key reactions to the unexpected move by the Bank's Monetary Policy Committee (MPC).
IAN MCCAFFERTY, CHIEF ECONOMIST, CBI
"It is disappointing that, with only tentative indications about the outcome of the wage round, the Bank has already decided to increase interest rates.
"If part of the intention was to dampen wage increases, it is doubtful a rate rise will have the desired effect.
"Unless wage settlements pick up steeply in coming months, inflation is set to fall back towards the Bank's mid-point target of 2% during the second half of 2007.
"The economy is already expected to slow over the course of the year."
ADAM LENT, HEAD OF ECONOMICS, TUC
"Today's decision smacks of panic rather than considered judgement. The MPC itself has said that it expects inflation to fall in 2007 as the effects of higher energy prices fade.
There is not enough evidence to justify an increase in rates, which will be damaging for industry."
GRAEME LEACH, CHIEF ECONOMIST, INSTITUTE OF DIRECTORS
"This was a tough but wise decision.
"The MPC needed to stamp down on inflation given the upside risk at present.
"Inflation is well above target, spare capacity is low, money supply growth is high and the housing market looks perky.
"Throw in on top the risk of accelerating wage settlements and the Bank of England's pre-emptive strike looks sensible."
DAVID KERN, ECONOMIC ADVISER, BRITISH CHAMBERS OF COMMERCE
"We appreciate the MPC must make difficult choices, and we accept that inflationary pressures have edged up, and the dangers have increased.
"But we believe that the clear risks that growth may slow sharply in both the US and the eurozone should have been taken more fully into account by the MPC, before tightening policy.
"The MPC could have afforded to wait until trends in the labour market became clearer.
"If firm evidence emerges that there is no acceleration in wage settlements, the MPC should consider an early reversal of today's increase in interest rates."
DAVID BROWN, CHIEF EUROPEAN ECONOMIST, BEAR STEARNS
"Never underestimate the Bank of England's penchant for
"Quite clearly the MPC's hackles are up and they are clearly concerned about the recent acceleration in UK inflation to 2.7%, and the fast pace of monetary expansion, currently close to a 16-year high.
"This is a complete anathema to BOE monetary policy sensibilities."
ROGER BOOTLE, ECONOMIC ADVISER TO DELOITTE & TOUCHE
Today's surprise decision to raise interest rates to 5.25% may not prove to be the peak in interest rates. I now believe that interest rates will rise to a peak of 5.50% sometime in the first half of this year - and possibly as early as next month.
Today's decision to raise interest rates is surely intended as a warning ahead of those pay deals due to be settled this month.
What's more, the rebound in the oil price at the end of last year means that it is likely that CPI inflation will rise further above the 10-year high of 2.7% recorded in November when December's figures are released next week.
Despite the previous two interest rate hikes in this cycle, households' appetite for secured borrowing has remained strong, which has fuelled house price inflation.
Interest rates are likely to rise again to 5.50% and if the data stays strong, they could rise even further. 6% is not a silly figure.
KIT JUCKES, HEAD OF DEBT MARKET RESEARCH AT RBS
"The MPC is once again reinforcing its status as the world's most hawkish central bank.
"The currency obviously benefits from this and it will increase nervousness about
what the European Central Bank and the Fed are going to do next.
"This could tip the balance for a sell-off in stocks and corporate bonds."