Fears of a recession have mounted following the Bank of England’s decision yesterday to raise interest rates to 5%.
The Monetary Policy Committee was expected to raise rates by half that amount, but instead sprang a surprise with a half-point interest rate rise, with financial markets expecting at least three more increases before the end of the year to force down inflation.
Money markets expect borrowing costs to peak at 6.1% by the end of the year, a level of tightening economists warned would risk pushing the economy into a downturn.
Andrew Bailey, governor of the Bank of England, said the aggressive action against inflation was not designed to “precipitate a recession… But we will do what is necessary to bring inflation down to target.”
