UK faces double-digit inflation and shrinking economy, BoE warns

The Bank of England was in the spotlight after both the RBA and US Federal Reserve had raised rates.“The stage is set for a pretty bleak winter of discontent [at the end of 2022], with the economy heading into reverse and little end in sight to rising prices given the ongoing toll the war in Ukraine is having on commodity markets,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

“We may need to increase interest rates further in the coming months. But that all depends on what happens in the economy and what we think will happen to the rate of inflation over the next few years,” the bank said in its monetary policy report. Capital Economics chief economist Paul Dales said that beneath the bank’s hawkish interest-rate increase were some dovish undertones, including the downbeat economic outlook and no decision yet on whether to start selling off its holdings of government bonds.

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