NFLATION will top 10% by the end of the year, the highest rate since 1982, the Bank of England warned today.
It also said the UK will slide into recession later this year due to higher energy prices, one of the most negative outlooks from the Bank many in the City can remember.
As it put up interest rates for the fourth time in a row as it tries to fight back against souring price rises, the Bank offered a glum outlook.
Rates today went from 0.75% to 1%, a 13-year high.
But three of the nine strong Monetary Policy Committee — Jonathan Haskell, Michael Saunders and Catherine Mann – voted to keep rates on hold.
That suggests they think the economy dipping is a far biggest risk than inflation to people’s finances.
Yael Selfin, Chief Economist at KPMG UK, said: “Weakening economic growth makes it harder for the Bank to orchestrate a smooth return of inflation to target, with the risk that a steep rise in rates triggers an unnecessary recession just as price pressures ease. A tight labor market will be a key concern for the MPC this year, as it could translate into further pressures on pay.”
In March, UK inflation hit a 30-year high of 7% as food and energy prices jump.
Many in the City think the Bank was too slow to act on rates, not beginning to move them up from crisis-level lows of 0.1% until December.
The Bank is supposed to hit an inflation target of 2%, but was initially sanguine about exceeding that, insisting inflation would pass by the summer. That now seems unlikely.
Kallum Pickering at Berenberg said: “If we are unlucky, the UK is already in the early stage of a recession.”
Credit: www.standard.co.uk /