The Bank of England warned that the UK economy will slide into recession later this year as higher energy prices push inflation over 10 per cent and cause the worst squeeze in household finances for many decades.
Despite the grim outlook, the bank’s Monetary Policy Committee voted on Thursday to raise the interest rate by a quarter point to 1 per cent to its highest level since February 2009. Three of the nine MPC members voted for a half-point rate increase.
In tightening monetary policy, the committee members decided that this winter’s surge in gas and electricity prices would not cause enough financial pain to bring inflation sustainably back under control, so additional action to raise borrowing costs and damp spending was needed.
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