Bank of England unveils largest interest rate hike in 27 years

The Bank of England has on Thursday raised interest rates by 50 basis points, its largest single increase since 1995 as it warned the UK economy is heading for more than a year of recession amid soaring inflation.

The 1.75 percent interest-rate hike was backed by eight of the bank’s nine policy makers, who also pledged to act forcefully again in the future if needed, potentially putting similar rises on the table for upcoming meetings.

This is the first half-point hike since the bank was made independent from the British government in 1997.

The bank is expecting the UK economy would start shrinking in the fourth quarter, enter recession later this year, and then keep contracting through next year. That would be the longest recession since after the 2008 financial crisis.

UK inflation recorded a new 40-year high of 9.4 percent in June as food and energy prices continued to soar, deepening the country’s historic cost-of-living crisis.