You are using an older browser version. Please use a supported version for the best MSN experience.

Bank of England warns UK set to enter recession

Leicestershire Live logo Leicestershire Live 04/08/2022 Tom Kershaw
The Bank of England is expected to announce its largest interest rate rise in almost 30 years on Thursday as the UK faces soaring inflation © PA The Bank of England is expected to announce its largest interest rate rise in almost 30 years on Thursday as the UK faces soaring inflation

The UK economy will enter recession later this year, the Bank of England has warned. The UK is set to fall into it longest recession since the financial crisis.

Inflation will also peak at more than 13 per cent as gas prices soar, the Bank of England has warned. The value of the pound dropped 0.05 per cent lower against the US dollar at 1.211 shortly after the Bank of England's rate rise was confirmed, having been 0.7 per cent higher ahead of the announcement. The pound has dropped 0.5 per cent against the euro to 1.189.

Shadow chancellor Rachel Reeves said: "This is further proof that the Conservatives have lost control of the economy, with skyrocketing inflation set to continue, while mortgage and borrowing rates continue to rise. As families and pensioners worry about how they're going to pay their bills, the Tory leadership candidates are touring the country announcing unworkable policies that will do nothing to help people get through this crisis."

READ MORE Snakes are invading British beaches as dog owners issued warning

"The United Kingdom is now projected to enter recession from the fourth quarter of this year," the Bank's Monetary Policy Committee (MPC) said. "Real household post-tax income is projected to fall sharply in 2022 and 2023, while consumption growth turns negative."

The Bank said: "Inflationary pressures in the United Kingdom and the rest of Europe have intensified significantly since the May Monetary Policy Report and the MPC's previous meeting. That largely reflects a near-doubling in wholesale gas prices since May, owing to Russia's restriction of gas supplies to Europe and the risk of further curbs.

"As this feeds through to retail energy prices, it will exacerbate the fall in real incomes for UK households and further increase UK CPI inflation in the near term.

"CPI inflation is expected to rise more than forecast in the May Report, from 9.4 per cent in June to just over 13% in 2022 Q4, and to remain at very elevated levels throughout much of 2023, before falling to the 2 per cent target two years ahead." It added: "The United Kingdom is now projected to enter recession from the fourth quarter of this year.

READ NEXT:

AdChoices
AdChoices

More from Leicestershire Live

Leicestershire Live
Leicestershire Live
image beaconimage beaconimage beacon