The Bank of England has announced a quarter point increase in interest rates.

Rates now stand at 4.75 per cent - with many mortgages set to rise as a result.

But the FT predicts that the "dovish tone" of the monetary policy committee's statement makes a further rise next month less likely.

The CBI said the bank was adopting a "steady strategy" of gradual, well-signalled rises.

"The UK economy is running at close to full capacity, with five consecutive quarters of strong growth," said chief economic adviser Ian McCafferty

Meanwhile, lobby groups have warned that there is a serious threat that more expensive oil could send petrol prices above the 85 pence-per-litre level that sparked protests four years ago.

The higher cost of crude would bring the Treasury an extra £3 billion in oil tax revenues this year.

The government will also make another £300 million per year from extra fuel VAT.

Neil Greig of the AA said: "We are calling on the government to reduce fuel tax by 10 pence a litre to bring it in to line with the rest of Europe, and a six pence reduction based on these latest findings would be a very good place to start."