The Bank of England warned that the UK has already fallen into recession after raising interest rates to a 14-year high.
It is the seventh time that the Bank has raised rates.
When the UK banking system faced collapse, borrowing costs rose to their highest in six years.
Since December, interest rates have gone up.
Inflation is at its highest rate in more than four decades. The Bank of England has a 2% target.
The rise was less than anticipated.
The Bank was expected to raise interest rates by 0.75 percentage points, in line with moves by the US Federal Reserve and the European Central Bank.
People should be encouraged to borrow less and spend less if interest rates are raised. People should be encouraged to save more.
There's a chance that it can hurt the economy.
The UK economy was predicted to be in a recession by the Monetary Policy Committee. It's when the economy shrinks for two quarters in a row.
Between July and September, the UK economy is expected to have shrunk by a small amount. In the second quarter of the year, the UK's output fell.
The Bank said that the government's intervention to subsidise domestic bills through the Energy Price Guarantee was likely to limit significant further increases.
It now expects inflation to peak at just under 9% in October, up from its previous prediction of just under 12%.
Inflation is currently five times the Bank of England's 2% target and even if it peaks in October it is expected to remain above 10% for the next few months.
Even though interest rates are at a 14-year high, they are still relatively low.
After the financial crisis and the UK's vote to leave the European Union, the Bank of England cut borrowing costs, keeping them close to a record low.