Bank of England raises rates by most since 1989 even as recession looms

Central bank raises bank rate to 3% from 2.25%

The Bank of England raised interest rates by the most since 1989 on Thursday but it also warned that Britain faced a long recession and told investors borrowing costs were likely to go up by less than they expect.

The BoE increased Bank Rate to 3% from 2.25% even as it said Britain's economy might not grow for another two years, a slump longer than during the 2008-09 financial crisis.

The pound fell sharply and was down about 2% against the US dollar at 1315 GMT, touching its lowest since mid-October when Britain was in a political crisis triggered by