The UK is to go into recession after the Bank of England announced it had raised interest rates to their highest level since January 2009.
Interest rates are going from 1.25 per cent to 1.7 per cent and the national bank expects the country to go into ‘five quarters of recession’ as a result.
High energy prices, Russia’s invasion of Ukraine and a ‘slower growth in the United Kingdom’ have been cited as reasons behind gross domestic product falling as much as 2.1 per cent.
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In its Monetary Policy Report, the Bank of England said: “Higher energy prices are one of the main reasons for this.
“Russia’s invasion of Ukraine has led to more increases in the price of gas. Since May, the price of gas has more than doubled. We think those price rises will push inflation even higher over the next few months, to around 13 per cent.
“Higher prices for the goods that we buy from abroad have also played a big role.
“There is also pressure on prices from developments in the United Kingdom. Businesses are charging more for their products because of the higher costs they face.
“There are more job vacancies than there are people to fill them, as fewer people are seeking work following the pandemic.
“That means that employers are having to offer higher wages to attract job applicants. Prices for services have risen markedly.
“The squeeze on households’ incomes due to the rise in energy prices has led to slower growth in the UK economy. We expect the size of the UK economy to fall over the next year.”
On Tuesday, the Bank of England said it had increased interest rates in order to ‘bring inflation back down,’ adding that it will ‘take time to work’.
Inflation is set to keep rising this year, before falling again at the start of next year’s crisis as a result of inflation.
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