International Business: BoE flags risk of recession and 10pc inflation as it raises rates again – Gulf Digital News

International Business: BoE flags risk of recession and 10pc inflation as it raises rates again – Gulf Digital News

LONDON: The Bank of England sent a stark warning that Britain risks a double-whammy of a recession and inflation above 10 per cent as it raised interest rates on Thursday to their highest since 2009, hiking by quarter of a percentage point to 1pc.

The pound fell by more than a cent against the US dollar to hit its lowest level since mid-2020, below $1.24, as the gloominess of the BoE’s new forecasts for the world’s fifth-largest economy caught investors by surprise.

They also trimmed bets on the central bank hiking rates aggressively this year. Short-dated British government bond yields slid sharply.

The BoE’s nine rate-setters voted 6-3 for the rise in Bank Rate from 0.75pc, with Catherine Mann, Jonathan Haskel and Michael Saunders calling for a bigger increase to 1.25pc.

Economists polled by Reuters had forecast an 8-1 vote to raise benchmark borrowing costs to 1pc, with one policymaker opposing a hike.

Central banks are scrambling to cope with a surge in inflation that they described as transitory when it began with the post-pandemic reopening of the global economy, before Russia’s invasion of Ukraine sent energy prices spiralling.

The BoE said it was also worried about the impact of renewed Covid-19 lockdowns in China which