Bank of England Forecasts Recession, Raises Rates

AUG 4 2022·Updated AUG 9 2022

Story

Image credit: AP [via Al Jazeera]

The 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.
BBC News
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.
Al Jazeera
If the economy meets the bank's estimates, the UK would be looking at the longest recession since the financial crisis of 2008.
The Telegraph
With take-home pay set to shrink by 3.5% this year and 4.5% next year, companies are facing difficulties retaining staff and the government is coming under greater pressure to help the most vulnerable.
The Telegraph
Some have accused the MPC - which last year incorrectly predicted inflation would peak at 4% - of failing to act quickly enough as the cost of living crisis erupted in the UK.
Guardian
The frontrunner in the contest to replace Boris Johnson as PM, Liz Truss, has been especially critical of the MPC - a potential indicator that the group's independence could come under threat.
Guardian

Sources Split

LEFT

CENTER

RIGHT

ESTAB
CRIT

CENTER

PRO
ESTAB

The 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.

Spectator (UK)

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.