Bank of England raises interest rates to 3% warns longest recession ever in UK

Bank of England boss Andrew Bailey says the Mini-budget “damaged” the UK’s reputation and warns the UK is likely to face its longest recession since records began.

The Bank is raising the rates in order to try and bring down soaring cost of living price rising at its fastest rate in 40 years.

To help inflation return to our 2% target, this month we have raised our interest rate to 3%.

In September, prices had risen by 10.1% compared to a year ago. That is well above our 2% target.

During the Covid pandemic people started to buy more goods. But the people selling these have had problems getting enough of them to sell to customers. That led to higher prices – particularly for goods imported from abroad.

Higher energy prices are one of the main reasons for this. Russia’s invasion of Ukraine has led to more large increases in the price of gas.

While it will not be the UK’s deepest recession, it will be the longest since records began in the 1920s, which will continue next year and into the first half of 2024.

A general election is on the books for late next year.

The unemployment rate is currently at its lowest for 50 years, but it is expected to rise.

Chancellor Jeremy Hunt said: “The most important thing the British government can do right now is to restore stability, sort out our public finances, and get debt falling so that interest rate rises are kept as low as possible.”

Read Bank of England’s full Monetary Policy Report – November 2022.