Bank of England raises borrowing costs to highest level since late-2008

By Aysu Bicer

ANKARA (AA) - The Bank of England on Thursday raised interest rates by 75 basis points to 3%, marking its largest hike since 1989 and bringing borrowing costs to their highest level since late-2008.

The increase from 2.25% came after a majority 7-2 vote at the monetary policy committee of the bank, whose latest projections indicated "a very challenging outlook for the UK economy."

Rising back to a 40-year high, inflation hit 10.1% in September and is expected to pick up to around 11% in the fourth quarter of the year, well above the bank's 2% target.

The central bank also said further hikes may be needed for a sustainable return to the inflation target.

The pound went down following the Bank of England's interest rate announcement and warning of recession, with the currency dropping 1.4% to 1.123 against the greenback and 0.9% lower versus the euro at 1.16.