The Bank of England BoE hiked its interest rate for a tenth time in a row on Thursday, as global authorities race to combat sky-high inflation.
It also predicted a shallower than expected UK recession this year, as the country faces a cost-of-living crisis.
The BoE voted at a regular meeting to lift its key interest rate by half-point to 4 per cent, the highest level since late 2008.
The London stock market advanced in early afternoon trade as investors digested a decision that was in line with expectations.
The European Central Bank raised eurozone interest rates by the same amount on Thursday after the US Federal Reserve gave a quarter-point increase on Wednesday.
It's too soon to declare victory, but inflationary pressure is still there, Andrew Bailey, BoE governor, told a press conference.
Neil Wilson, analyst at trading firm Finalto, said that the BoE signalled that it would tighten further if inflation pressures persist.
According to minutes from the gathering, policymakers voted 7 -- 2 in favor of the rate increase, with a minority calling for no change.
The BoE predicted that the UK's economic downturn would be milder this year than previously predicted, noting that inflation was likely to have peaked in many advanced economies.