Britain’s Central Bank Announces Biggest Rate Hike In 27 Years; Warns Of Recession
By Stefan J. Bos, Chief International Correspondent Worthy News
LONDON (Worthy News) – The Bank of England (BoE) raised interest rates by the most in 27 years on Thursday and warned a prolonged recession is on its way.
Despite the economic decline, the BoE’s Monetary Policy Committee voted 8-1 for a half percentage point rise in Bank Rate to 1.75 percent – its highest level since late 2008 – from 1.25 percent.
While the hike increases borrowing costs impacting investments, the BoE said it had to rush to smother a rise in annual inflation, which is now set to top above 13 percent.
That would be the highest level of inflation in 42 years. Inflation, the loss of purchasing power over time with the British pound not going as far tomorrow as it did today, will impact millions, with many facing breadlines, experts warned.
Incomes, once adjusted for inflation and taxes, are predicted to fall sharply this year and next, in the worst recession in records dating back to the 1960s.
Britain’s worsening cost-of-living crisis will cost millions of households their savings unless the government increases support for households immediately, a leading think tank warned.
The National Institute of Economic and Social Research (NIESR) said Britain was “sliding into a recession” that will hammer the country’s most deprived areas.
It will force more than a million households to choose between heating their homes and purchasing sufficient food, the experts explained.
Consumer price inflation hit a 40-year high of 9.4 percent in June, and NIESR expected it to be slow to fall, averaging 6.9 percent next year.
Government officials have cited rising energy and food prices linked to the war in Ukraine as the main reason for the colossal inflation and expected recession.
Critics argue that besides the war, Britain also faces the financial consequences of exiting the European Union, though not all supporters of Brexit agree.
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