Birmingham: After the Bank of England raised interest rates significantly and predicted inflation to reach 13% by Christmas, the UK is facing a prolonged recession and the worst decline in living standards in a generation.
Banks hiked interest rates by half a percentage point to 1.75% on Thursday night, the biggest rise in 27 years. The UK now faces a much tougher economic outlook than the US and Europe, according to forecasts.
The bank expects the country to slip into a 15-month long recession later this year, with GDP contracting by 1.5% next year. Officials expect the slowdown to start in the fourth quarter of this year and continue through the end of 2023. This points to a steady decline in the economy over the next year.
Households are also more exposed to energy price shocks than the US and less protected by government measures than the eurozone. At the same time, the UK economy has also been affected by her Brexit.
Household gas and electricity costs are expected to rise another 75% in October to about £3,500 ($6,100) a year, up from the bank’s previous forecast of 40%. Energy prices, which have already risen 54% this year, will triple their levels by the fall from where they were a year ago.
Annual inflation is expected to rise from 9.4% in June to a peak of 13.3% in October, the highest level since September 1980. It will remain ‘very high’ for much of next year before returning to the 2% target. 2 years later.
The pound fell 0.5% against the US dollar to $1.208, up 0.7% before the announcement. Against the euro he was 1.182 euros, down 0.5%.
Governor Andrew Bailey said after the decision that “the Russian shock was the biggest driver of inflation in the UK”.
Bank of England Raises Interest Rates Significantly, Prolonged Recession Expected
Source link Bank of England Raises Interest Rates Significantly, Prolonged Recession Expected