The Bank of England has raised its interest rates from 1.25 percent to 1.75 percent — the biggest hike in 27 years.
The central bank of the United Kingdom explained that the decision was taken to tackle rising inflation.
British annual inflation surged to a 40-year high in June on rising motor fuel and food prices at 9.4 percent.
It also projected that the surge in gas prices would push inflation to around 13 percent by the end of the year.
“The main way we can bring inflation down is to increase interest rates. Higher interest rates make it more expensive for people to borrow money and encourage them to save,” the bank said.
“That means that, overall, they will tend to spend less. If people on the whole spend less on goods and services, prices will tend to rise more slowly. That lowers the rate of inflation.
“To help inflation return to our 2% target, this month we have raised our interest rate to 1.75%.”