The Bank of England (BoE) decided to increase the base interest rate from 2.25% to 3% last month in a bid to curb inflation.
The 0.75 percentage point rise is the largest hike since 1989 and the eighth consecutive increase since December2021.
Updated projections from the Bank's Monetary Policy Committee (MPC) indicated that the UK would face a "very challenging" two-year recession, with unemployment potentially doubling by 2025.
With inflation climbing at its fastest rate in 40 years, the BoE hopes that raising interest rates will reduce inflation by increasing the cost of personal and business borrowing to lower demand.
While this decision will benefit savers, higher interest will place more burden on people with mortgages, credit card debt and bank loans.
Chancellor of the Exchequer Jeremy Hunt acknowledged how families and businesses would be affected by the higher rates but pledged to "restore stability" to the UK economy and deliver long-term growth.
The BoE said:
"The Committee continues to judge that if the outlook suggests more persistent inflationary pressures, it will respond forcefully, as necessary.
"The MPC will take the actions necessary to return inflation to the 2% target sustainably in the medium term, in line with its remit."
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