The Bank of England's interest rate rise will move us closer to recession ✒️ NicolaHorlick via ipaperviews
In his Budget a few days ago, Jeremy Hunt told the public that the Office for Budget Responsibility believed that recession would be avoided this year, although GDP would decline by 0.2 per cent. The technical definition of a recession is two quarters of negative growth. There is a risk that with core inflation rising, spurred on by wage increases, the Bank of England will raise rates further in the near term, making a recession more likely.
The Conservative Party continues to have internal debates about how to generate economic growth. There is no doubt that in the current environment, it is difficult to see how this might be achieved. The Treasury needs to focus on how it can encourage companies to invest, and government needs to fund infrastructure projects. Not the ones that take 30 years to come to fruition, but the building of new hospitals and schools, which is badly needed in any event.
The economic future for Britain looks pretty bleak currently. I don’t envy the members of the Monetary Policy Committee at the Bank of England and, on balance, I suppose they had no choice other than to raise rates today. However, I strongly feel that they need to take stock before their next meeting and remember that fixed rate mortgages will soon start coming to an end creating a further and unwelcome financial burden for millions of borrowers.
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