STORY: The Bank of England on Thursday (November 3) did its biggest rate hike since 1989.
Its benchmark rate increased by three quarters of a percentage point to 3%.
Governor Andrew Bailey said there was no choice, despite tough economic conditions:
“So why are we doing it and why are we doing it now when so many people are already struggling with higher energy and food prices and other bills? Well, quite simply, we are increasing bank rate because inflation is too high. It's the bank's job to bring it down.’'
The BoE expects inflation to hit a 40-year high of around 11% during this quarter.
It also thinks the country has entered a recession that could see the economy shrink for the next two years.
The governor also had to answer questions about the country’s recent political turmoil.
During her few weeks as prime minister, Liz Truss introduced, and then dropped, tax and borrowing plans that spooked markets.
Bailey tried to be diplomatic:
“There has been a questioning of UK policy, I use UK policy broadly here, it's not for me to talk about. I'm not going to talk about politics now. I'm just going to talk about policy now and it will have some lasting effect. And we have to work very hard to put that in the past quite frankly.''
Now the UK hike comes a day after a similar increase by the Federal Reserve.
The U.S. central bank also said rates might have to rise even faster.
But Bailey offered struggling mortgage holders a glimmer of hope - he said UK rates were likely to go up less than markets currently expected.