BOE Raises Rates by Most Since 1995, Warns of Long Recession

 The Bank of England unleashed its biggest interest-rate hike in 27 years as it warned the UK is heading for more than a year of recession under the weight of soaring inflation.

The half-point increase to 1.75%, predicted by most economists, was backed by eight of the central bank’s nine policymakers, who also kept up a pledge to act forcefully again in the future if needed.

“The committee will be particularly alert to indications of more persistent inflationary pressures and will if necessary act forcefully in response,” Governor Andrew Bailey told reporters in London. “All options are on the table for our September meeting, and beyond that.”

The BOE also boosted its forecast for the peak of inflation to 13.3% in October amid a surge in gas prices and warned that price gains will remain elevated throughout 2023. That will sharpen a cost-of-living crisis that will see real disposable incomes fall more than at any time in around 60 years.

Even after billions of pounds of government support for struggling households, families are set to be around 5% worse off by the end of 2023 with incomes falling both this year and next.

The pound pared gains dipped after the move, which was accompanied by a warning that a UK recession would begin in the fourth quarter and last all the way through next year.

That would be the most prolonged slump since the financial crisis, with officials expecting the economy to shrink by around 2.1%.

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