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Bank of England Forecasts Recession, Raises Rates

Facts

  • The Bank of England (BOE) on Thurs. raised interest rates by 50 basis points to 1.75% - the biggest increase in 27 years - and warned of a recession as the economy is forecasted to shrink from October until the end of 2023.
  • Eight of the BOE's nine Monetary Policy Committee (MPC) members supported the rate hike, with the Bank predicting inflation will exceed 13% in the last three months of the year - its highest level in over four decades.
  • If the economy meets the bank's estimates, the UK would be looking at the longest recession since the financial crisis of 2008.

Sources

Spin

Right narrative

Liz Truss's tough new standards and criticisms have forced the MPC to act to tackle the spiraling economy. It's a positive indicator that the Conservative politician who will likely become the next leader of the country has the common sense and influence to make key institutions like the BOE more decisive and effective.

Left narrative

This sixth interest rate rise in a row is not designed to cool an overheating economy, but to keep the BOE's policy in step with senior Conservatives' thinking. This increase is only going to add economic pain to the poorest in society while Liz Truss turns the current chaos of the UK economy into an electioneering weapon.

Nerd narrative

There is a 50% chance that inflation in the UK will be at least 10.1% in 2022, given Liz Truss wins the Conservative Party leadership contest, according to the Metaculus prediction community.

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