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Bank of England warns the UK will fall into recession this year - BBC
Aug 04, 2022 2 mins, 8 secs

In a 'blunt message" the Bank of England governor warns interest rates may have to rise even higher.

The Bank of England has warned the UK will fall into recession as it raised interest rates by the most in 27 years.

Interest rates rose to 1.75% as the Bank battles to stem soaring prices, with inflation now set to hit over 13%.

Governor Andrew Bailey said he knew the cost of living squeeze was difficult but if it didn't raise interest rates it would get "even worse".

The main reason for high inflation and low growth is soaring energy bills.

The Bank's governor Andrew Bailey said he had "huge sympathy and huge understanding for those who are struggling most" with the cost of living.

"I know that they will feel, 'Well, why have you raised interest rates today, doesn't that make it worse from that perspective in terms of consumption?', I'm afraid my answer to that is, it doesn't because I'm afraid the alternative is even worse in terms of persistent inflation.".

Patrick Reid, a business owner in London, owes £25,000 on credit cards and loans and fears an interest rate rise will cost him.

"The fact they're both on holiday on the day the Bank of England forecasts the longest recession in 30 years speaks volumes about the Tories' warped priorities.".

Mr Zahawi insisted he was still working and had a call with Governor Andrew Bailey after the interest rate announcement.

It is the most piercing of warning sirens set off by the Bank of England.

Announcing the largest rate rise in more than a quarter of a century in an attempt to temper even higher peaks in inflation of an incredible 13% is what the Bank of England actually did today.

This is a proper full fat recession at the same time as the inflation rate is forecast to hit a 42-year high.

The Bank's answer will be that rates are still low by historic standards and they just cannot provide further fuel for these extraordinary but hopefully temporary high inflation rates to last for years.

The Bank warned UK economic growth was already slowing, adding: "The latest rise in gas prices has led to another significant deterioration in the outlook for the UK and the rest of Europe"

The rate of inflation is expected to stay at "very elevated levels" throughout much of next year, the Bank said

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