Bank of England raises interest rates to 1.75% as recession predicted later this year
The Bank of England governor has defended delays in hiking the interest rate.
The Bank yesterday increased interest rates to 1.75 per cent – the highest in 27 years – while warning that Britain will plunge into a year-long recession this autumn.
Mr Bailey said earlier interest rate rises could have damaged the UK’s economic recovery following the pandemic.
It came after claims from politicians, including Attorney General Suella Braverman, that the Bank was asleep at the wheel and allowed inflation to get out of control.
Mr Bailey told BBC Radio 4’s Today programme said he does not believe the Bank acted too slowly and that earlier action could have brought forward a recession.
“We don’t make policy with the benefit of hindsight,” he added.
“I’d challenge anyone sitting here a year, two years ago, to say there will be war on Ukraine and it will have this effect on inflation.”
‘Zombie government has checked out,’ Angela Rayner says
Responding to the recent interest rates hike and forecast from the Bank of England, Labour deputy leader Angela Rayner said: “Boris Johnson’s zombie Conservative government has checked out after crashing the economy.
“As the Bank of England forecasts the joint longest recession in three decades, the disgraced prime minister lingers on, asleep at the wheel, propped up by Tory MPs when he should be long gone.
“As people up and down the country are sick with worry about how they’ll pay the bills, ministers have gone missing in action.
“The Tories have no plan, no leadership and no answers just more of the same from these two continuity candidates.
“Only Labour can provide the fresh start the country needs.”
Labour Party deputy leader Angela Rayner (Dominic Lipinski/PA)
(PA Wire)
Thomas Kingsley5 August 2022 15:15
CBI director general Tony Danker said the leadership candidates cannot choose between tackling either inflation or growth and must tackle both, and there is a need to look at the whole tax regime without “cherry-picking”.
Speaking on BBC Radio 4’s World at One programme, Mr Danker said: “I think the candidates are having a debate about stagflation actually. Each candidate is sort of picking their worse evil to focus on first.
“But the trouble with stagflation is you don’t get to choose between tackling inflation or tackling recession, you have to tackle both.
“So, that’s challenge number one to the candidates, to not pick which one of inflation or recession they care about more, but to come up with a plan that tackles both.”
He added: “We need a genuine plan about growth, that when it comes to tax we need to talk about the whole tax regime, not cherry-picking the ones that are most totemic.
“We also need to think way beyond tax, we need to think about regulation that’s pro-growth, we need to think about boosting growth markets, and above all, given where most people are in business today, is we need to think about a plan to tackle labour and skills shortages.”
Thomas Kingsley5 August 2022 14:55
‘We cannot wait until 5 September for action,’ CBI chief warns
CBI director general Tony Danker said he fears a vacuum until the next prime minister is chosen, saying “we cannot wait until 5 September for action”.
He was speaking on BBC Radio 4’s World at One programme and was asked about the prime minister and chancellor being on holiday while the economic crisis looms.
Mr Danker said: “I have no problem with people having short holidays. My fear is much more profound, which is that there will be a vacuum from now until September 5.
“We need the current prime minister and the current chancellor to fill that vacuum. We need them to make decisions. We need them to make plans. We need them to reassure firms, markets and households that we are gripping this.
“We cannot wait until 5 September for action. We cannot wait until 5 September for plans and we cannot wait until 5 September for reassurance.”
He added: “I think they need to be developing these interventions that are going to help people with the cost of living in the autumn. They need to be signalling on August 26 when Ofgem signal what the price rise is going to be.
“They need to be signalling that the government has a response and an answer. And they need to be setting out growth plans and growth intentions now.”
Thomas Kingsley5 August 2022 14:35
US creates 528,000 new jobs
The US Non-Farm Payroll, which measures employment across the US, shows there were 528,000 new jobs created last month, beating forecasts of a slowdown to 250,000.
The US unemployment rate actually dropped to 3.5 per cent, with widespread job gains across leisure and hospitality, professional and business services, and health care – even though the US is technically in recession.
Wage growth was also stronger than forecast, with average hourly earnings up 0.5 per cent in the month.
Thomas Kingsley5 August 2022 14:15
Watch: ‘A recession is inevitable’ – Liam Fox says Liz Truss’ economic plan won’t work
Liz Truss’ economic plan won’t work, says Dr Liam Fox
Thomas Kingsley5 August 2022 13:55
Sunak accuses Truss of plans that would pour ‘fuel on the fire’ of recession
Rishi Sunak has accused Liz Truss of economic plans that would pour “fuel on the fire” just hours after the Bank of England warned the UK was heading for a recession.
In a shock announcement, the BoE forecast that the economy would shrink at the end of this year and continue contracting through the whole of 2023.
The former chancellor, who has argued that Ms Truss’s planned tax cuts are inflationary, told a Tory leadership debate organised by Sky News: “I’m worried that Liz Truss’s plans will make the situation worse.”
Thomas Kingsley5 August 2022 13:35
Next PM will have to find ‘many more billions to help households pay soaring energy bills’
The next prime minister will have to find “many more billions” of pounds to help households pay soaring energy bills, the head of a highly influential think tank has warned.
Paul Johnson, director of the Institute for Fiscal Studies, also said struggling public services will need more investment after the Bank of England predicted the UK would be plunged into the longest slump since 2008.
Sources in the Liz Truss camp did not deny that her planned emergency budget could come as early as September 21, as the dire state of the economy becomes the main issue in the race for Downing Street.
Read the full story below from our Whitehall editor, Kate Devlin:
Next PM will have to find ‘billions to help households pay soaring energy bills’
Think tank also warns public services will need more investment
Thomas Kingsley5 August 2022 13:15
Responding to UK house price falls Russell Galley, managing director, Halifax, said: “It’s important to note that house prices remain more than £30,000 higher than this time last year.
“While we shouldn’t read too much into any single month, especially as the fall is only fractional, a slowdown in annual house price growth has been expected for some time.
“Leading indicators of the housing market have recently shown a softening of activity, while rising borrowing costs are adding to the squeeze on household budgets against a backdrop of exceptionally high house price-to-income ratios.
“That said, some of the drivers of the buoyant market we’ve seen over recent years – such as extra funds saved during the pandemic, fundamental changes in how people use their homes, and investment demand – still remain evident.
“Therefore a slowing of annual house price inflation still seems the most likely scenario.”
Thomas Kingsley5 August 2022 12:48
Average UK house price falls month on month for first time since June 2021
The average UK house price slipped back in July from a record high the previous month, marking the first month-on-month dip since June last year, according to an index.
Following a year of exceptionally strong growth, house prices fell by 0.1 per cent month on month in July, Halifax said.
This represented a £365 month-on-month fall in cash terms, from June’s record average house price high of £293,586. Across the UK, the annual rate of price growth slowed to 11.8 per cent, down from 12.5 per cent in June.
In Scotland, the average house price was at a record high of £203,677, although it did see a slight slowdown in annual house price growth in July, to 9.6 per cent from 9.9 per cent the previous month.
Thomas Kingsley5 August 2022 12:25
Ben Shephard criticises government for being too ‘busy’ for GMB interview amid recession forecast
Ben Shephard has criticised the government for refusing to send a minister to appear on Good Morning Britain amid warnings of a year-long recession hitting this autumn.
During Friday (5 August) morning’s episode of GMB, host Shephard said that, while they had asked for a Conservative minister to appear on the show as they were being criticised for “being absent in a time of crisis”, they had not.
Showing an empty chair sat against a Westminster backdrop, he said: “We did invite a minister onto the show. Despite what we’ve just heard… they didn’t want to turn up. They haven’t got time for us in their busy schedule.”
Read the full story below:
Ben Shephard criticises Tories as GMB interview chair empty amid recession forecast
‘They didn’t want to turn up. They haven’t got time for us in their busy schedule,’ presenter said
Thomas Kingsley5 August 2022 12:05
Source: Independent
