LONDON (AP) – England’s central bank predicted on Thursday that the U.K. of Ukraine.
The rate hike, by a point over three quarters, raised the bank’s key interest rate to 1.75%, the highest since December 2008, the worst moment of the global financial crisis. The rise was expected after most economists said two weeks before the bank’s governor, Andrew Bailey, that the UK central bank would “act resolutely” if the inflation outlook worsened.
And apparently it will get worse.
The bank said the inflation rate would exceed 13% in the last three months of the year and would remain “very high” until 2023. The forecast shows a sharp increase from 9.4% in June, its 40-year high, and paints a bleaker picture of the future. Britons are already facing an inflationary crisis that has raised the cost of everything from groceries to utility bills.
Bank forecasters say inflation will hit its highest level in 42 years amid a doubling in wholesale natural gas prices due to the war. They say energy prices will push the economy into a five-quarter recession, with GDP shrinking every quarter in 2023.
“Therefore, growth is very weak by historical standards,” the bank said.
Central banks around the world are scrambling to contain rising inflation without propelling economies that were just beginning to recover from the coronavirus pandemic into recession. Higher interest rates increase the cost of borrowing for consumers, businesses and the government, which tends to reduce spending and slow the rise in prices, but such measures are also likely to slow economic growth. .
