The Bank of England (BoE) has hiked interest rates by 0.5% points to 1.75%, the biggest increase in 27 years.
The BoE said that because of the latest surge in gas prices, it now expected inflation to rise above 13% at the end of the year, and to remain at very elevated levels throughout 2023 before falling back to the 2% target in two years’ time.
While the bank predicts the U.K. will avoid a technical recession (two consecutive quarters of contraction), it said output will collapse by close to 1% in the final quarter of this year. In 2023, annual GDP is expected to shrink by 0.25%.
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