IT HAS been teasing us for a while, but the Bank of England’s Monetary Policy Committee has now given its clearest indication yet that interest rates could be set to rise in the short term.

When it met this week, the committee’s members voted seven to two to keep the base rate at its all-time low of 0.25 per cent, but said that “some withdrawal of monetary stimulus is likely to be appropriate over the coming months in order to return inflation sustainably to target”.

In simple terms, that means interest rates are going to go up - possibly as early as November - in order to get inflation under control. You see, the day before the Bank made its rates decision the Office for National Statistics announced that inflation had risen from 2.6 per cent in July to 2.9 per cent in August, far outstripping the Government’s target of two per cent.

One of the main drivers for the sharp rise in prices is that the weakness of sterling since the Brexit vote has sent the cost of imported goods and raw materials spiralling. Clothing and fuel prices in particular were behind the rise in August.

With wage inflation falling well below price inflation at 2.1 per cent, rising prices affect everyone by essentially devaluing the amount of money we have in our pockets.

That said, it is savers - and pensioners in particular - who are seen to be most affected by the rise in inflation.

According to Ross Andrews, director of Minerva Lending, with inflation at its current level the average UK saver would see their money devalued by £5,000 over a seven-year period while it would take them 11 years to make the same amount if their cash was invested in the highest-paying instant access savings account.

His calculations are based on SunLife’s assertion that the average person in the UK has savings of £26,180 and that the cash is invested in Newbury Building Society’s instant access account, which is currently paying 1.6 per cent rate.

“This really does underline the extent of the savings risk,” he said.

“Inflation wins the race hands down as it stands, which is a huge headache for savers, whose household finances receive a triple blow from a squeeze on consumer spending.”

Prudential retirement expert Vince Smith-Hughes said pensioners are disproportionately affected because, unlike workers, their incomes come from a finite pool - in effect their savings are their incomes.

“The biggest risk for people living on a fixed income is that they will outlive their retirement savings and have to be careful about how much they withdraw for their pension,” he said.

“Drawing too much income from their pension fund too quickly increases the chance that they prematurely exhaust their funds in retirement.”

Despite this backdrop, the MPC has been reluctant to raise rates until now over fears about damaging a still-fragile economy.

With unsecured consumer credit rising by 10 per cent to almost £201 billion in the year to June, even a small increase in rates could make managing that debt difficult at best for large swathes of the population.

Consumer spending, which has been keeping the economy afloat, would be likely to come to an abrupt halt as a result.

It is for this reason that Maike Currie, investment director for personal investing at Fidelity International, feels that savers’ hopes of an imminent rate rise may well be thwarted.

“It’s now almost a decade since the Bank of England first took the knife to rates and despite talk about a rate hike being around the corner, it comes as little surprise that the Bank of England’s Monetary Policy Committee is still in no rush to raise rates from their historic lows, with a majority seven to two members voting to hold rates at 0.25 per cent [this week],” she said.

“Despite hawkish sounds from policymakers at the Old Lady of Threadneedle Street, it’s still the doves that rule the roost.

“Last month, the committee’s message was that interest rates would probably have to rise, and by more than markets were pricing in, but there seems little urgency to tighten, at least outside the small group that favoured a hike.

“Currently, the economic data paints a mixed picture. While manufacturing numbers look stronger, construction figures have dipped. The jobs market continues to improve, but while unemployment is at a 42-year low, our pay packets are going nowhere.”

In any case, the MPC has indicated that when rates do begin to rise the increases will be small and incremental. While savers are unlikely to be dancing in the streets over a 0.25 percentage point rate rise, particularly as there is no guarantee that providers will pass it on in their own rates, there is a silver lining of sorts to the Bank’s latest comments.

Sterling, whose value has failed to recover after plummeting in the wake of the Brexit vote, has regained some ground against the dollar and, to a lesser extent, the euro.

The rally is likely to be shortlived, though - as a note from banking group Societe General pointed out, “it was the Brexit referendum last year that sent sterling into a tailspin, and the overriding Brexit risks have not faded”.

The message is clear: if you’re planning a foreign trip for the October break it may make sense to buy your currency now.