INTEREST rates have risen to 3% as the Bank of England announced the biggest hike for three decades.
The rate rose by 0.75 percentage points to a fresh 14-year high, as the Bank attempts to tame runaway inflation.
It is the largest increase in rates since 1989 - apart from the rise on Black Wednesday in 1992.
The UK could be facing the longest period of recession since reliable records began in the 1920s, the Bank has warned.
The grim news has sent the pound plummeting again - dropping 1.4% to 1.123 against the US dollar - and will pile around £3000 per year onto mortgage bills for those households that are set to renew their deals, the Bank said.
The economy could fall into eight consecutive quarters of negative growth if current market expectations prove correct.
It would be the longest period of uninterrupted decline that the nation has experienced for around a century.
Scottish Greens economy spokesperson Maggie Chapman said the news will come as a "hammer blow" to families with millions now facing a painful winter.
She said: "This will come as a hammer blow to households, families, and businesses all across Scotland and beyond. It is symptomatic of the financial chaos of a Tory government that cannot be trusted with our economy.
"This hike isn't happening in isolation. With soaring prices and skyrocketing energy bills, the Tories are taking a wrecking ball to living standards. They have crashed the economy for everyone but their wealthy friends, and are making ordinary people pay the price.
"Millions will be facing a cold and painful winter. It is being made even worse by a multi-millionaire Chancellor who has made clear that nothing will be off the table when it comes to cuts.
"This is the cost of being ruled by a cruel and incompetent Tory government that we did not vote for."
The economy has faced similarly long recessions in the past, but then the quarterly drops have been broken up with an occasional positive quarter.
However, the Bank cautioned that this forecast is based on interest rates reaching as high as 5.2%, which the Bank said it does not necessarily expect to happen.
It could be a drawn-out recession but will be less than half as severe as the 2008 financial crisis, the Bank said.
It follows economic turmoil caused by the UK Government's mini-budget under former prime minister Liz Truss, which saw the pound plummet in value against the US dollar.
The SNP's economy spokesperson Alison Thewliss added the UK Government needs to urgently "get a grip" on the ever-worsening cost-of-living crisis.
She said: “The Tories have created economic turmoil, showing exactly why Scotland needs independence.
"To reach its full potential, Scotland needs to escape the constant chaos of Westminster control.
“Despite warnings that the UK faces the longest recession in a century and interest rates rising again to unsustainable levels, the Westminster government is still sitting on its hands rather than bringing in meaningful support.
“Millions more could be plunged into, or further into, poverty and mortgage holders now face thousands of pounds extra in interest, with many at risk of falling into arrears or having their homes repossessed if they cannot afford it.
"The new Prime Minister needs to scrap plans for austerity 2.0 and urgently get a grip of this growing cost-of-living crisis that the Tories are exacerbating."
From its highest to lowest point, GDP is expected to drop 2.9%, the Bank said, compared with 6.3% during the financial crisis.
Meanwhile, unemployment is expected to peak at around 6.5%, from 3.5% today, slightly lower than in 2008.
All but two members of the Bank's Monetary Policy Committee (MPC) voted to push up interest rates by 0.75 percentage points during a crunch meeting on Thursday.
The Bank also predicted inflation would peak at around 11% at the end of this year, while the unemployment rate could hit 6.4% by the end of 2025.
