The Bank of England on Thursday announced its biggest rate hike since 1995 and predicted the UK would slip into a prolonged recession later this year as inflation rises further.
The BoE’s Monetary Policy Committee cut the key interest rate by 8 to 1 by 0.50% to 1.75% and issued a statement that borrowing will be more expensive during the cost of living crisis.
The BoE said “inflationary pressures in the UK and other European countries have increased significantly” since May.
“As this impacts retail energy prices, it will exacerbate the decline in UK household real incomes and further increase UK CPI inflation in the near future.”
UK inflation had already jumped to 9.4% in June, the highest in 40 years.
“The UK is now projected to enter recession starting in the fourth quarter of this year.”
The UK economy is expected to contract by up to 2.1% from its all-time high, according to forecasts.
The BoE’s move mirrors aggressive monetary policy by the US Federal Reserve and European Central Bank last month, as the world races to cool red-hot inflation fueled by Russia’s invasion of Ukraine.
The BoE’s main mandate is to bring inflation closer to its 2.0% target.
In addition to the photos, the UK’s energy regulator Ofgem is set to raise electricity and gas prices in the country again in October, just before the northern hemisphere winter turns cold.
Separately, Ofgem warned on Thursday that Britons were facing a “very difficult winter”, adding that energy price caps would be reviewed quarterly, not every six months.
Liz Truss leads in a poll against former Conservative Finance Minister Rishi Sunak, who was the first to react to Thursday’s dismal BoE news.
“As Prime Minister, my priorities are to contain inflation, grow the economy and cut taxes.”
“Today’s (BoE) news highlights the need for a bold economic plan that I am advocating. We need to take immediate action to provide
first published as BoE predicts recession as inflation surges, announces big rate hike
BoE predicts recession as inflation surges, announces big rate hike
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