Inflation: Bank of England raises interests rate to 3%

The Bank of England unveiled its biggest rise in interest rates in more than three decades on Thursday,  in a bid to tame soaring levels of inflation as it predicted a peak inflation rate of just under 11 per cent.

The bank’s Monetary Policy Committee (MPC) rose the base rate by 0.75 percentage points to 3 per cent.

That represents the eighth consecutive jump in interest rates by the central bank, and the biggest increase since 1989.

Pound Sterling weakened on the foreign exchanges, to sit at $1.1201 — 1.7 per cent down — at 12.20pm local time Thursday after the rate rise was imposed, its lowest level since October 21.

It also warned that the UK could be on course for the longest recession since reliable records began in the 1920s, as the economy faces a “very challenging outlook”.

Gross domestic product (GDP) could shrink for every quarter for the next two years, with growth only returning in the middle of 2024.

The government is expected to announce tax rises and spending cuts as part of the budget, potentially further weighing on growth.