Bank of England delivers huge rate hike as U.K. braces for recession

• The latest interest rate hike takes the Bank of England's key policy rate to 3%, the highest since 2008.

What's new: The Bank of England signaled that rates will ultimately peak at a lower level than financial markets currently anticipate.

• "We think bank rate will have to go up by less than priced into financial markets," Andrew Bailey, the head of the central bank, told reporters on Thursday. "That is important because, for instance, it means that rates of new fixed-term mortgages should not need to rise as they have done."

The backdrop: It was the central bank's first policy decision since Liz Truss' brief stint as the nation's prime minister.

• Her tax cut proposals that ultimately led to her downfall roiled financial markets. The Bank of England had to step in to buy government bonds to help steady markets.

Where it stands: The Bank of England still expects the government to provide some fiscal support to households facing soaring energy prices that have fueled inflation.

• That would limit inflationary pressure on the energy front "significantly," the Bank of England said, but it may free up households to spend elsewhere, possibly resulting in more inflationary pressure elsewhere.
• The outlook for the U.K. is bleak. Forecasts by the Bank of England suggest that the country is likely already in a recession that could last until 2024.

Editor's note: This article has been updated with new details throughout.