UK announces biggest rate hike since 1989

The move to tackle soaring inflation may hit thousands of homeowners with higher mortgage costs

The Bank of England announced the biggest interest rate increase in more than three decades on Thursday. The key rate was hiked by three-quarters of a percentage point in a move to curb inflation.

The central bank made its eighth interest rate hike in less than a year, lifting its benchmark rate to 3%, the highest since November 2008. It comes as the regulator predicted a “prolonged” recession for the British economy, which it said could be the longest contraction in modern history, with no recovery until 2024.

This is the first meeting of the Bank of England since the premiership of Liz Truss, which created a period of financial turbulence. But while the former PM’s economic policies are now being revised, rising food and energy costs are keeping prices high.

The annual inflation rate surged to 10.1% in September, returning to the 40-year high hit in July and five times the central bank’s target.

READ MORE: UK food inflation soaring

Bank officials have said they are determined to bring inflation down to 2% and will use higher interest rates to do so even though the measure is expected to hit thousands of homeowners with higher mortgage costs.

The move by the British regulator comes on the heels of rate hikes made by the US Federal Reserve on Wednesday and the European Central Bank last week.

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