Image source, Getty Images

By Michael Race

Business reporter, BBC News

Interest rates have been hiked to their highest for 14 years in an attempt to slow the soaring cost of living.

The Bank of England's decision to lift rates to 4.25% from 4% comes after figures showed the cost of living rising by more than expected.

Prices rose at a faster rate than expected last month driven by a sharp increase in the cost of food.

The rate rise comes despite lingering worries over the global financial system after two US banks failed.

The Bank has been steadily putting up interest rates in an attempt to tackle the soaring cost of living.

Inflation, which is the rate at which prices rise, remains close to its highest level for 40 years - more than five times what it should be.

The Bank voted to increase its benchmark rate to a fresh 14-year high following inflation increasing "unexpectedly", but it said price rises remained "likely to fall sharply over the rest of the year".

Its rate-setting Monetary Policy Committee voted in favour of the latest rise by a majority of seven to two, with the Bank saying "cost and price pressures have remained elevated".