The Bank of England has raised interest rates for the first time in over 10 years, after the Monetary Policy Committee said falling unemployment meant there was “limited slack” in the economy.

The official bank rate has been lifted from 0.25 percent to 0.5 percent, the first time that rates have been lifted since before the financial crisis.

Seven out of the nine members voted in favour of higher rates., but the committee reiterated that future increases in rates would be at “a gradual pace and to a limited extent”.

The financial markets are expecting the Bank of England to follow a similar strategy to that of the US Federal Reserve, with several more rate hikes to come over the next three years.

The Bank of England is currently facing a challenge from inflation, which despite governor Mark Carney’s target level of 2 percent hit 3 percent in September. Wage growth also remains weak, at just 2.1 percent.

The rise in interest rates is likely to have a positive impact on savers, with Vince Smith-Hughes, retirement expert at Prudential, commenting:

“Rising interest rates will be welcomed by retired people who often have a large proportion of their savings in deposit accounts. Rising inflation has eroded their retirement income as deposit accounts fail to keep pace with inflation. The rise in interest rates will hopefully see better returns from savings accounts. Using the right wrappers to minimise tax is also important.”