The Bank of England has today raised interest rates to 2.25% - the highest level since November 2008.
The bank has raised rates in a bid to keep inflation under control. Inflation currently stands at 9.9% -well above its 2% target.
The bank also said it expects a 0.1% fall in GDP over the current quarter, suggesting the UK is already in a recession.
The decision was set to be announced on September 15 but the statement was delayed following the Queen's death.
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The Bank said: "Since August, wholesale gas prices have been highly volatile, and there have been large moves in financial markets, including a sharp increase in government bond yields globally. Sterling has depreciated materially over the period."
It said the Government's Energy Price Guarantee was "likely to limit significantly further increases in CPI inflation".
It added: "There have been further signs since the August Report of continuing strength in domestically generated inflation. In and of itself, the Government’s Energy Price Guarantee will lower and bring forward the expected peak of CPI inflation.
"For the duration of the Guarantee, this might be expected to reduce the risk that a long period of externally generated price inflation leads to more persistent domestic price and wage pressures, although that risk remains material.
"The labour market is tight and domestic cost and price pressures remain elevated. While the Guarantee reduces inflation in the near term, it also means that household spending is likely to be less weak than projected in the August Report over the first two years of the forecast period. All else equal, and relative to that forecast, this would add to inflationary pressures in the medium term."
The news comes ahead of tomorrow's "fiscal event" mini-Budget in which Chancellor Kwasi Kwarteng will unveil details of how Liz Truss's new Government plans to stimulate economic growth.
