Recession On Way...Time To Batten Down The Hatches

'We have to raise rates to fight inflation'

- Sarah O’Grady

BRITAIN faces a grim economic future as the Bank of England warned of a 15-month recession.

The big squeeze got even worse after Bank Governor Andrew Bailey, pictured, raised interest rates to 1.75 per cent – and some experts forecast that they might soar to three per cent this year.

The only good news was for retirees, who are on track for 10 per cent pension rises under the Government’s triple-lock pledge. Mr Bailey expects the economy to fall into decline in the last three months of this year and to keep shrinking until the end of 2023.

He warned that the tough action of raising interest rates was needed now to prevent the cost-of-living crisis from becoming “even worse”.

Yesterday’s 0.5 per cent base rate rise – the sixth consecutive increase – is the sharpest hike in 27 years. The Bank is battling to stem soaring prices, with inflation – already at a 40-year high of 9.4 per cent – set to top 13 per cent in October.

Mr Bailey admitted the cost-of-living squeeze was difficult – but said the longest recession since the 2008 global crisis was about to grip the UK, with energy costs sent sky-high by Russia’s war on Ukraine.

A typical home’s monthly energy bill will be almost £300 by October.

Mr Bailey said he had “huge sympathy and huge understanding for those who are struggling most. I know that they will feel, ‘Well, why have you raised interest rates... doesn’t that make it worse?’.

“It doesn’t – because I’m afraid the alternative is even worse in terms of persistent inflation.”