The UK is set to enter an economic recession in the coming few months as the Bank of England has announced its decision to increase the interest rates to their highest level. It’s been a considerable hike since 2009.
Therefore, economic recession is set to come due to highest increase ever in interest rates.
Today, the BoE declared a hike in a rate that would be from 1.25 per cent to 1.75. This is the biggest single increase witnessed in the UK economy since the mid-nineties.
Per a prediction, inflation measures change to everyday living costs. Usually, it will peak at 13.3% by the end of 2022, suggesting the highest inflation rate since September 1980.
Experts say that a rise in interest rates is needed to respond to this inflation. However, to some economists, it’s not feasible as the decision will only worsen the crisis.
The Bank Rate of interest is a considering factor for determining the cost of borrowing in the UK. The rise in this rate will affect the amount people will take to repay as loans, on their mortgages, or on credit card debt. Even a small rise in this rate can have a noteworthy impact on bills.
Bank said on Thursday said, “Against the backdrop of another jump in energy prices, there had been indications that inflationary pressures were becoming more persistent and broadening to more domestically driven sectors,”.
Economist Grace Blakeley is confident that the hike will worsen the cost-of-living crisis.
“Raising interest rates is not going to help anything,” she told local news.
“It’s going to make the problem worse, because you’re adding on a big chunk, in terms of interest repayments, to household monthly bills”, she further added.
“We know that raising interest rates to choke off demand in the economy isn’t going to solve the fact that we’re not producing enough fuel – we need to invest in renewables.
As per some experts, it is important to protect households from inflation which means sustaining the standard of living of the workers demanding wage increases in line with inflation.