The Bank of England projected Thursday that the United Kingdom’s economy would enter a recession at the end of the year and hiked interest rates by the largest amount in more than 27 years, pushing to tame accelerating inflation driven by the fallout from Russia’s invasion of Ukraine.
The rate hike of three-quarters of a point pushes the bank’s key interest rate to 1.75%, the highest since the depths of the global financial crisis in December 2008. Most economists expected the hike after Gov. Andrew Bailey said two weeks ago that the United Kingdom’s central bank would “act forcefully” if the inflation picture worsened.
And worsen it will. Inflation will accelerate to over 13% in the final three months of the year and remain “very elevated” for much of 2023, the bank said. The forecast reflects a sharp increase from the 40-year high of 9.4% recorded in June.
