A cost of living crisis, with UK inflation expected to hit 7 percent, has prompted the Bank of England to raise interest rates - with the first back-to-back increases, albeit incremental, since 2004.

The Monetary Policy Committee announced another 25 basis-point hike, taking the Bank Rate to 0.5 percent. The previous move was in December from historic lows.

That much, the markets expected. The surprise was that four members of the nine-member monetary policy committee (MPC)  - the rate-setting panel - wanted a bigger increase to 0.75 percent, to tame inflation. That more hawkish stance strongly hints at further rate rises in March and May.

The worry is inflation - with higher energy costs, increased demand and supply chain issues driving up consumer prices.

UK households are facing a record increase in bills of 54 percent now that the regulator, Ofgem, has lifted the maximum rate that suppliers can charge. 

It is the second major increase in energy bills in six months, and the largest on record, that will likely drive millions of households into fuel poverty for the first time.

The UK Government then announced a financial support package of tax rebates and loans to take the sting out of rising energy bills and help tackle the impending cost of living crisis.

But Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said the cost of living squeeze is looming large.

"With budgets already under so much pressure from the rise in cost of goods and services, trying to tether sky-high inflation is highly likely to be the number priority of policymakers in the hot seat of decision making," she said.

Meanwhile, in a radically different approach to re-setting a global economy, the European Central Bank says the decision was unanimous to keep Eurozone interest rates on hold.

Inflation is transitory – that's the ECB's story and they are sticking to it, despite inflation at record highs.

But the President of the European Central Bank, Christine Lagarde finally acknowledged inflation risks.

"Inflation is likely to remain elevated for longer than previously expected, but to decline in the course of this year," Lagarde said, adding that the recent price increases are mostly driven by higher energy and food costs.

"The situation has indeed changed," she said. It was notable that Lagarde did not repeat her previous guidance that an interest rate increase this year was "very unlikely".

Analysts are betting on a couple of Eurozone interest rates moves during the course of this year.