The Bank of England has raised the base rate of interest and warned that the UK is facing its longest ever recession.
At its November meeting, the Bank’s Monetary Policy Committee (MPC) voted to increase the Bank Rate from 2.25% to 3%, the biggest increase in more than three decades.
This takes borrowing costs to the highest level since the financial crisis in 2008.
The Bank warned that the UK could face an extended contraction in the coming years, with high inflation and the unemployment rate reaching 6.5%.
UK inflation is currently at a 40-year high of 10.1%.
The outlook for the UK economy is “very challenging”, the MPC said.
Bank of England governor Andrew Bailey told a news conference: “From where we stand now, we think inflation will begin to fall back from the middle of next year, probably quite sharply.
“To make sure that happens, the Bank Rate may have to go up further in the coming months… but by less than currently priced in financial markets.”
Chancellor Jeremy Hunt said: “The most important thing the British government can do right now is to restore stability, sort out our public finances, and get debt falling so that interest rate rises are kept as low as possible.”
