It is predicted that the recession will last until the end of 2023, resulting in the “steepest decrease in living standards on record.”
When it announced the most significant increase in interest rates in 27 years, the Bank of England predicted that the UK would experience a recession.
In a troubling set of economic predictions, the bank predicted that inflation would soar above 13%, resulting in the sharpest pressure on living standards in more than 60 years.
It forecast that the UK would experience its most prolonged decline since 2008 in the final three months of this year. According to the BBC, the economy will “remain contracting until the end of 2023.”
The Editorials’ Views
The Times reported that there isn’t much ambiguity regarding the near future. With household disposable income predicted to shrink by 3.7% over the next two years, the hike in interest rates and the rise in energy prices will lead to “the greatest decline in living standards on record.”
The Bank of England’s future is “gloomy,” according to The Telegraph, and “even the Bank’s newest estimates could likely underestimate the pain to come.” The Daily Mail concurred, alerting readers that “harder times are speeding down the track for British families.”
The Guardian questioned the usefulness of the Bank’s decision to raise rates, claiming it will “accomplish precisely zero” in lowering the price of wheat or oil on international markets. “In this situation, rising rates do nothing except exacerbate the economic suffering by adding mortgage and credit card payments to the list of worries for families already struggling to pay for food and energy,” it read.
Observations Of The Commentators
The recession “will then last the rest of next year, with inflation scarcely below 10% even in a year’s,” said Faisal Islam, economics editor of the BBC, “if global energy costs remain where they are.” People in positions of authority would also be impacted in addition to everyday citizens. Do not misunderstand, he continued, “a prognosis like this would imply a wrecking ball to the forecasts for government borrowing.”
The predicament will make it more challenging to maintain a roof over your head, according to Vicky Spratt, housing correspondent for The I newspaper. We can anticipate “rent increases, rising monthly mortgage repayments, and higher interest rates for first-time purchasers,” according to what she wrote on rising interest rates.
Robert Peston of ITV remarked that the outcome of the Conservative leadership race would significantly impact what happens to the UK economy moving forward. He added, “For Tories, the decision for their leader and the UK’s prime minister would be between lower direct taxes with Ms Truss or lower rapid interest rates with Mr Sunak.
“For the avoidance of doubt, neither Mr Sunak nor Ms Truss is proposing anything that would persuade the Bank of England the UK can escape a big recession, a significant drop in national revenue, this year,” he continued.
Are There Any Good Signs?
There are few signs of hope, but those concerned about rising interest rates can find solace in decreasing market predictions of future increases.
According to Ross Clark’s article in The Spectator, the forward yield curve revealed that. In contrast, in June, markets anticipated the Bank of England’s base rate to peak at 3.59% in July 2023; this week, markets expect rates to rise at 2.85% in June 2023, which is “quite a substantial downwards revision.”
And some prices are already starting to decline. The trend in underlying inflation, which excludes gasoline, food, cigarettes, and alcohol, has been described as “encouraging” by The Guardian. Core inflation has decreased for two consecutive months, from 6.2% in April to 5.8% in June.