The Bank of England has raised interest rates from 1.25% to 1.75% — the biggest single rise since 1995 — and warned that the UK will fall into recession this year.
Interest rates are now at their highest level since December 2008.
The Bank’s Monetary Policy Committee voted by a majority of 8-1 to increase the base rate by 0.5 percentage points to help prevent the inflationary impact of soaring energy prices being compounded by price and wage pressures.
Inflation is currently at 9.4% — far above the Bank’s 2% target — and is predicted to reach just over 13% by the end of the year due to higher energy bills.
A typical dual-fuel bill is expected to increase from just under £2,000 per year to around £3,500 in October, taking household energy bills to around £300 per month on average.
The Bank also said that it expects the UK economy to contract in the final three months of this year and to continue shrinking until the end of 2023.
That would make it the longest downturn since the 2008 financial crisis.