The Bank of England (BoE) has raised interest rates for the tenth time running.
The hike comes as the UK slips into an estimated two years of recession.
And bankers warn of inflation.
BoE Governor Andrew Bailey was one of seven on the nine-person panel to agree interest rates must rise.
The rate was pushed up 50 basis points and is now running at four per cent – its highest level in 15 years.
Home and businesses are already feeling the financial pain of increased prices and commodities.
Earlier this week the International Monetary Fund (IMF) said the UK would be the only rich economy to contract this year – but grow next year.
Mr Bailey said:
“Since the November monetary policy report, we’ve seen the first signs that inflation has turned the corner.”
“We have done a lot on rates already.
“The full effect of that is still to come through.
“But it’s too soon to declare victory just yet, inflationary pressures are still there.
“There’s also been a marked increase in inactivity amongst 50 to 65 year olds.
“Many say they’ve retired early making a choice about the life they would like to live.
“At the same time, however, many people report that they’re affected by long term illness, a number of these people say they’re unlikely to come back into the labour market.
“This significant and lingering fall in the labour supply weighs on the UK economy’s potential.”
Chancellor Jeremy Hunt backed the Bank’s hike.
With a March 15th budget looming Mr Hunt said he would resist “the urge to fund additional spending or tax cuts through borrowing, which will only add fuel to the inflation fire and prolong the pain for everyone”.