Top economists have warned the UK could tip into recession as interest rates are poised to rise again this week.
Gerard Lyons, a former adviser to the Prime Minister, said botched decision-making by the Bank of England means ‘a sharp slowdown is now inevitable’ and recession ‘possible’.
The central bank’s monetary policy committee meets this week and is expected to raise the base rate from 0.75 per cent to 1 per cent – the highest since 2009.
Warning sign: Economists said the Bank of England has been too slow to lift rates, allowing inflation to run rampant at 7 per cent – more than triple the target set by the Government
Economists said the Bank of England has been too slow to lift rates, allowing inflation to run rampant at 7 per cent – more than triple the target set by the Government.
One former regulator said the bank should have raised rates to twice the current level.
‘I’ve been surprised how slowly the bank has responded. I would have taken interest rates to 1.5 per cent by now,’ he said.
Capital Economics forecasts a rate rise at every MPC meeting this year, taking the rate to 2.25 per cent. Neil Shearing, its group chief economist, said: ‘This year is the point of maximum pain. It will feel like a recession.’
Lyons, chief economic strategist at Netwealth, warned that recession is ‘possible’ later this year. He said the bank had committed ‘two wrongs’, first by easing policy last year despite inflation warnings – then tightening policy just ‘as the economy is heading into a recession under a cost of living crisis’.
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