In a move that flew in the face of most forecasts, the Bank of England put up the cost of borrowing last week by 0.25 percentage points to 4.75 per cent.
While some analysts and economists had predicted a hike in the base rate to keep inflation in check, it was widely expected that interest rates would remain on hold at 4.5 per cent for the 12th month in a row.
The Bank said the pace of economic activity had "quickened in recent months".
"Household spending appears to have recovered from its post-Christmas dip," it added. "Business investment growth and investment intentions have also picked up."
A rate rise was necessary, the Bank explained, to bring inflation back to target in the medium term.
Opinion on the wisdom of the decision was divided. Ray Boulger, from broker John Charcol, said British economic statistics had been "mixed" over the past month.
"Nationwide building society's seasonally adjusted house price index for July showed a 0.8 per cent increase - which gave those clamouring for a quarter-point increase in the base rate a timely statistic," he commented. "But the Halifax's figures showed an increase of only 0.2 per cent - and over the past three months, a seasonally adjusted fall of 1 per cent.
"Bearing in mind that monthly house price statistics are volatile, these figures do not justify a rate increase."
The mixed signals from the property market, Mr Boulger added, suggested that the rate decision was based on concerns about the increase in the Consumer Price Index to 2.5 per cent (from 2.2 per cent in May), and expectations that rising energy costs will push it still higher.
Elsewhere, the Council of Mortgage Lenders welcomed the decision. "The increase has been anticipated by the market for a number of months and is in line with our forecasts," said spokesman Bob Pannell. "While the rise might come as unwelcome news for hard-pressed borrowers, timely action by the Bank should limit the extent to which rate rises are needed in future."
The move will mean an increase in interest payments of £20.83 per month for borrowers paying their lender's standard variable rate on a £100,000 mortgage, according to the price-comparison service Moneysupermarket.com.
But the website warns that with average house prices now standing at more than £200,000, first-time buyers looking to borrow this amount can expect their monthly costs to rise by more than £40.
All this said, the Bank of England's move is good news for savers, as those with a variable- rate account should now benefit from increased returns.
Financial advertising: Fewer firms are misleading investors
The number of financial promotions deemed "unclear, unfair or misleading" to consumers has declined, according to the Financial Services Authority (FSA) - but it says further improvements are still needed.
The City watchdog reported that some of the "higher risk" advertisements - for products such as investments, insurance and mortgages - include direct mail and internet promotions.
The FSA found that out of 109 investment promotions investigated, the number falling below regulatory standards had dropped to 32 per cent so far in 2006 - down from more than half in the same period in 2004.
But it said there had been only "limited improvements" in the general insurance and sub-prime mortgage sectors.
Over the past two years, the watchdog has looked at 4,500 promotions across a wide range of media, and pursued more than 820 cases directly with firms whose promotions have failed the regulatory requirements.
In 2005, the FSA fined firms nearly £1.4m for breaching rules on financial promotions.
"We continue to see variations in standards across different sectors, but overall we have seen improvement over the last two years," said Vernon Everitt, spokesman for the regulator.
"But we must see further progress. Responsibility for ensuring that customers are given clear and straightforward descriptions of financial products and services lies squarely with the senior management of the companies selling them."
Utility bills: BT rings the changes on home phones
Millions of BT customers will benefit from changes in their phone bills, following the decision by the telecoms giant to cut the prices of some of its main residential deals.
But in a less positive move for consumers, the company will switch from per-second to per-minute billing. This means a call lasting two minutes and two seconds, say, would be rounded up and charged as three minutes. Chris Williams, from the price-comparison service uSwitch.com, warned that this could "hit consumers in the pocket, albeit discreetly".
As from last Tuesday, the company slashed its BT Together Options 2 and 3 deals by almost a third, and began offering a 25p discount on monthly line rentals to customers who opt to receive bills over the internet. It is also offering free weekend and evening landline calls - if customers sign up for 18 months.
This is in response to changes in the way charges are set. The telecoms regulator, Ofcom, has removed price controls on BT's residential phone service for the first time since the company was privatised in 1984 - leaving BT free to set its own tariffs.
"We've reduced prices by over £1bn in the last decade and now our customers have the chance to save even more," said BT spokesman Ian Livingston.
SimplySwitch.com, another price-comparison website, welcomed the price cuts.
"They are good news for consumers as they will help fuel further competition in the home phone market," said spokes- woman Karen Darby. "As BT is no longer the monopoly player, the cost of calls has fallen significantly in recent years. We would like to see providers following BT's lead and reducing the rates of their basic packages."