The entity had foreseen a 13% rise prior to the Government’s announcements to contain the price of energy, announced by the former Prime Minister, Liz Trusswho had to leave office after the collapse of the markets unleashed after the announcement of his budget that reflected a reduction in taxes and an increase in spending.
The update of the rates took them from 2.25% to 3%, their highest level since 1989.
According to analysts, if the entity’s predictions come true, the United Kingdom could face the longest recession period since reliable records began.
The bank estimated that the UK entered a recession in the third quarter of this yearas household incomes were squeezed by rising global energy and goods prices and predicted to last until mid-2024.
They also estimate that the GDP will fall 0.5% in the third quarter of this year, and -0.3% for the fourth quarter. For the annualized projection, in 2022 they expect GDP to grow 4.25%, to fall 1.5% in 2023 and 1% in 2024.
The rise in interest rates this Thursday is the eighth in a row and the first since the presentation of the failed economic plan by the former Minister of Finance, Kwasi Kwarteng, which caused turbulence in the financial markets and a vertiginous increase in mortgage rates, in addition to the collapse of the pound. kwarteng was fired on October 14 and replaced by Jeremy Hunt. In Truss’s case, she was replaced by whoever was her competitor in the election, Rishi Sunakwho said that “he will make difficult decisions” to correct “mistakes” of his predecessor.
It is estimated that the increase in interest rates further affect the holders of mortgage loansthe savings accounts and the rates interest charged on credit cards, bank and car loans.
Before the announcement, the governor of the Bank of England, Andrew Baileysaid that the “inflationary pressures” meant a “stronger response” might be needed than had been forecast in August.
The war in Ukraine and the long recovery from the pandemic are also contributing to the rising energy and food costs.
Sunak promised to submit a new economic plan towards the end of the monthwith further tax increases and cuts in the public sector.
The cost of living in England grew in 2022 at its fastest rate for 40 years, with rising food and energy prices as the main causes. The price of food and non-alcoholic beverages increased by 14.6% in the year Until September.
This week, The President of the European Central Bank, Christine Lagarde, stated that “inflation is still too high in the euro zone” and announced that they plan to insist on new rate hikes to “ensure that inflation returns to the new medium-term target of 2%.” In parallel, this Wednesday the Federal Reserve The United States also raised its benchmark interest rate in an attempt to control inflation.