UK ‘in recession’ as Bank of England hikes interest rates to highest since 2008

The Bank of England has announced it will hike interest rates to their highest in more than 13 years and indicated it believes the economy is already in recession. The

central bank had previously projected the economy would grow in the current financial quarter but said it now believes Gross Domestic Product (GDP) will fall 0.1%. It comes

after a reported 0.2% fall in GDP in the second quarter and would mean the economy is currently in recession. A technical recession is when the economy shrinks for two

quarters in a row. The Bank’s Monetary Policy Committee (MPC) decided to raise rates to 2.25% – their highest since November 2008 – from 1.75%, in an effort to grapple big

increases in the cost of living. In committee minutes, it said the “tight labour with wage growth and domestic inflation” above targets called for a “forceful

response”. Nevertheless, the hike was below the expectations of the financial markets, who had predicted a 0.75 percentage point hike in line with the rate increase

announced by US Federal Reserve on Wednesday. The MPC came to the decision after five members of the nine-strong board voted for the 0.5 percentage point increase, including

Governor of the Bank Andrew Bailey. Three members – Jonathan Haskel, Catherine Mann and Dave Ramsden – voted in favour of a 0.75 percentage point rise, while on member –

Swati Dhingra – called for a 0.25 percentage point increase. The decision to lift rates is a bid to keep inflation under control. It is the best tool that the Bank of

England has to steer inflation – currently at 9.9% – back to its 2% target.