The Bank of England (BoE) warns that the UK may face the longest recession in 100 years after it raised the interest by 0.75% to 3%, the biggest single interest rate rise since 1989.
“Inflation is the enemy and is weighing heavily on families, pensioners and businesses across the country. That is why this government’s No 1 priority is to grip inflation, and today the Bank has taken action in line with their objective to return inflation to target.”
– Jeremy Hunt, Chancellor of the Exchequer
The UK economy is expected to face a two-year long recession, that began this summer and will last until the middle of 2024. The Bank expects unemployment to rise from 3.5% to 6.5%.
However, the central bank doesn’t think the interest rate will rise above 5%, arguing that a two-year recession means it can take a much less aggressive stance.
Analysts at Berenberg Bank forecasts only one more rate rise, to 3.5%.
By the end of 2022, the Bank expects inflation to peak at 11%, and then to fall “probably quite sharply” from the middle of 2023. The BoE expect inflation to fall to zero in 2025.
