05 Aug 2022
The Bank of England (BoE) has warned that the UK will go into recession later this year as it raised interest rates for the sixth consecutive time.
The largest increase in UK interest rates in 27 years saw the base rate rise to 1.75%, up from 1.25%.
The Monetary Policy Committee made the decision as inflation is set to soar over 13% by the end of this year, the Bank warns, and remain elevated in 2023.
Announcing today's interest rate decision, it says the surge in gas prices mean inflation will be even higher than previously feared.
The BoE also said that the UK is projected to enter recession from the fourth quarter of this year. Real household post-tax income is projected to fall sharply in 2022 and 2023, while consumption growth turns negative, it added.
Commenting on the decision, Alpesh Paleja, Lead Economist at the Confederation of British Industry, said: 'Despite early signs of some pipeline price pressures fading, it's clear that we're in for a hard winter. With another hefty rise in Ofgem's energy price cap looming, support for the most vulnerable households and businesses should be kept under review.
'Monetary policy is the first line of defence against inflation yet building resilience to future price shocks requires a concrete plan for economic growth. So, the new Prime Minister must prioritise boosting productivity through greater business investment via incentives and business rate reforms.'