Interest Rate Raised as Recession Looms

By Ashley Finill

BoE Raises interest rates

Yesterday the Bank of England announced, as expected, that they were raising the interest rate in the UK by 0.5% to 1.75%. Yesterday’s increase By the BoE is the biggest rate hike seen in the last 27 years, this has been implemented to try and counteract the staggering rise with inflation over the past few months as the economy tries to recover from the financial burden of the Pandemic. The drastic measures in raising the interest rate of the past few months is seen to be a longer-term solution to kickstart the poor performing economy, in doing this it tempts people to save at more attractive rates and spend less, bringing prices back down. The Governor of the BoE Andrew Bailey spoke after the decision and gave a stark warning that things are likely to get worse before they get better, as he predicted that the inflation figure in the UK is likely to reach its highest level since 1980 going above 13% in the fourth quarter.  This is due to the living crisis in the UK getting worse as the months have go on and they further warned to say that the UK economy will be plunged into recession for more than a year this autumn as rising energy costs keeps pushing inflation even higher. Ofgem yesterday also announced that price caps on energy will now be every 3 months rather than every 6 which brings further concern that rising energy costs will hit UK households in quicker succession. With that being said it may not be the last time we see drastic action taken by the Bank of England over the coming months. As a result of yesterday’s announcement although seen as somewhat positive the Pound started to lose ground on both the Euro and the dollar losing nearly a cent on both over the course of the afternoons trading. As we open this morning sterling has struggled overnight to regain any ground on both the major currencies.

Conservative Leadership race

The conservative leadership race continues as more debates are due to be held over the course of the next month as the members’ choice will be announced a month today on the 5th of September. Various reports have suggested that Candidate Liz Truss has so far has the upper hand throughout the las few debates against the ex-chancellor Rishi Sunak who had previously won all the ballots after former candidates were voted off. Members of the Conservative party have been seen to pledge their support towards Truss. However, last night Sky News held a debate and it was Sunak who won over the audience in the Battle for Number 10 Programme. The debate was mainly surrounding steps needing to be taken to recover post pandemic with Truss suggesting that the tax measures put in place by the chancellor at the time he was in Cabinet are what is causing the recession would be reversed, Sunak hit out at this and said that is simply wrong and what is causing the recession is inflation. More debates are to be held from now until the 5th of September so expect more twists and turns for who is to be favoured to become the next prime minister.