The Bank of England raised the interest rates by a quarter of a percentage point to 5.5 percent, highest level since 2001.

The rise, which was widely expected, was seen as the central bank's efforts to curb the rising inflation and cool down consumer spending.

The Bank of England is due to release its quarterly inflation report next week.

Manufacturing group the EEF said while it accepted rates had to rise, future increases could leave the UK's fragile manufacturing recovery at risk.

Figures released just hours before the bank's decision shows that manufacturing output in the country rebounded slightly in March.

Higher bills for homeowners are expected as it will add an extra 16 pounds a month on average to a 100,000 pounds mortgage.