Bank of England makes historic rate hike despite 'very challenging' outlook

Buses travel past the Bank of England (BoE) building, London, Britain. - REUTERS/File Photo

LONDON: The Bank of England raised interest rates to 3% on Thursday from 2.25%, its biggest rate rise since 1989 as it warned of a "very challenging" outlook for the economy.

The central bank forecasts inflation will hit a 40-year high of around 11% during the current quarter, but that Britain has already entered a recession that could potentially last two years - longer than during the 2008-09 financial crisis.