UK heading for recession, says the Bank of England
Daily Currency UpdateThe UK economy is heading for a recession, the Bank of England has said, as it raised interest rates to tackle the highest inflation the UK has seen in 40 years. A majority of the Bank’s nine-member monetary policy committee voted to increase the key base rate by 0.5 percentage points to 2.25%, which is its highest level since 2008.
With soaring energy bills and the rising cost of a weekly shop forcing households to rein in their spending, the Bank of England said the economy was heading for a second consecutive quarter of falling output, thus putting the economy into a technical recession.
Today we have chancellor, Kwasi Kwarteng, announcing the details of the government’s energy price guarantee and a package of sweeping tax cuts expected to cost more than £150bn to kickstart economic growth and shield households from soaring bills.
The pound has fallen below $1.12 against the US dollar, the weakest point since 1985, and has now lost 17% against the dollar so far this year. The decline is partly due to dollar strength, where the USD is at 20-year highs against a basket of currencies, due to worries about the global economy and the series of large interest rate hikes by the US Federal Reserve.
Key MoversGlobal central banks continued raising interest rates on Thursday, following the US Federal Reserve's fight against inflation that is sending shockwaves through financial markets and the economy.
The US dollar's value is soaring, helping ease inflation in the United States even as it raises the costs of many dollar-priced imports for other countries, a factor that may have led other central banks around the globe to follow suit.
- GBP/USD: 1.1105 - 1.1185 ▼
- GBP/EUR: 1.1405 - 1.1475 ▲
- EUR/USD: 0.9715 - 0.9785 ▼