The Bank of England raised its key interest rate by half a percentage point on Thursday and indicated that more hikes were likely, despite a looming recession, as it tries to bring down inflation that hit a 41-year high in October.

Average pay for British public sector workers fell to a 19-year low in October, after adjusting for inflation, according to official data on Tuesday that underscored why so many are going on strike.

The Bank of England warned on Tuesday about "significant pressure" on households and businesses due to higher inflation and borrowing costs, but said they were more resilient than before the global financial crisis.

The Bank of England looks set to raise interest rates to 3.5% or more next week, but policymakers appear increasingly split on how much tightening is needed to tame double-digit inflation as the economy heads into recession.

The Bank of England will press on with interest rate rises to battle inflation even though Britain is heading into a long albeit shallow recession, with consumers facing an extended cost of living crisis, a Reuters poll of economists found.

Sterling slipped against a strengthening U.S. dollar on Monday as global risk sentiment was dented by rising COVID-19 cases in China, which led to new restrictions in the world's second largest economy.

The UK's exit from the European Union is having a disproportionate effect on trade, argued Bank of England monetary policy committee member Swati Dhingra.

Higher interest rates can also boost a currency because investors are encouraged to bring money into the country to benefit from higher returns.

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.

Britain, rattled by the recent near meltdown of some pension funds, is pressing ahead to tighten oversight of the so-called shadow banking sector, taking the lead ahead of possible co-ordinated international action.

The Bank of England will pass a major milestone on Tuesday when it holds a first auction to sell some of the 875 billion pounds ($1.01 trillion) of government bonds it bought during successive quantitative easing (QE) programmes from 2009-2021.

The Bank of England looks set to raise borrowing costs by the most since 1989 next week even as it prepares for a recession that could be deepened by spending cuts under new Prime Minister Rishi Sunak.

British Prime Minister Rishi Sunak on Wednesday postponed an eagerly awaited budget plan due next week, as the youthful new leader got down to business after weeks of political turmoil.

Bank of England Deputy Governor Ben Broadbent told investors on Thursday that the big increases in interest rates they had priced in on the back of Prime Minister Liz Truss's fiscal plans would deliver a "pretty material" hit to the economy.

Britain's new finance chief Jeremy Hunt on Monday axed debt-fuelled tax cuts to further calm market turmoil.

Asian share markets slipped on Monday following another drubbing for Wall Street as investors brace for further drastic tightening in global financial conditions, with all the risks of recession that brings.

Britain's new finance minister Jeremy Hunt said on Saturday some taxes would go up and tough spending decisions were needed, saying Prime Minister Liz Truss had made mistakes as she battles to keep her job just over a month into her term.

New finance minister Jeremy Hunt promised to win back Britain's economic credibility by fully accounting for the government's tax and spending plans, while insisting his boss Liz Truss remained in charge of the country.

Britain's new finance minister Jeremy Hunt faces an early test of his attempt to stem the crisis of confidence in Prime Minister Liz Truss on Monday when the bond market delivers its verdict on his weekend overhaul of her economic programme.

British finance minister Kwasi Kwarteng cut short a trip to Washington to rush back early on Friday to London where pressure is mounting for the new government to scrap much of an economic programme that unleashed turmoil on financial markets.

International Monetary Fund Managing Director Kristalina Georgieva on Thursday rebuked the British government over its planned tax cuts, telling its finance minister and central bank chief that their policies should not be contradictory.

Euro zone borrowing costs fell on Thursday as investors paused for breath ahead of key U.S. economic data after driving government bond yields to fresh multi-year highs.

Longer-duration British gilt yields fell on Thursday, easing back from 20-year highs struck on Wednesday before the Bank of England bought 4.4 billion pounds ($4.88 billion) of debt at its daily reverse auctions - which are due to end on Friday.

Britain's new government said on Wednesday it would not reverse its vast tax cuts or reduce public spending as it sought to stand firm in the face of yet more turmoil in financial markets and concerns over its change in economic policy.

The Bank of England on Wednesday insisted it would end emergency buying of UK bonds by the weekend but sent markets into further frenzy as economic uncertainty grips Britain.

The dollar rose to a fresh 24-year high against the yen on Wednesday, moving above levels that prompted intervention by Japanese officials last month, as traders braced for U.S.

UK pension schemes are racing to raise hundreds of billions of pounds to shore up derivatives positions before the Bank of England calls time on support aimed at keeping them afloat.

The Bank of England must stick to its plan to quash the surge in inflation even if it means more pain for Britain's economy, Deputy Governor Dave Ramsden said, adding the new government's tax cuts could add to the inflation challenge.

The BoE intervention followed criticism Tuesday from the IMF, which argued that Britain's budget could increase inequality and worsen inflation.

British finance minister Kwasi Kwarteng sought to reassure investment bank executives on Wednesday the government had sound fiscal plans, in the face of a meltdown in British assets.