With inflation of 13% and the highest rate hike in decades, the UK enters a recession this year

With inflation over 13 per cent, Britain plummets deep recessionwith the biggest drop in living standards in the last 60 years.

This terrible news has not been heard from Prime Minister Boris Johnson, who is on his honeymoon in an unfamiliar place with his wife after the wedding party, nor from the Chancellor of Finance, Nadhim Zahawi, who is on vacation.

In a dramatic report, the Bank of England said family homes will take a record two years of falling wages. The gas crisis will push each household’s bills to £ 4,000 in energy alone. The bank raised the interest rate to 1.75 percent, the largest since 1995.

Record of decline in revenue

In a dramatic series of forecasts for the economy, the Bank said households will experience a record two years of falling incomes, such as the world gas crisis It will increase your energy bills.

The Bank raised its principal interest rate by 1.25-1.75 percentthe largest single increase since 1995, while trying to control the inflationary spiral.

Real household income, which is the value of wages after adjusting for inflation, will fall by 1.5% this year and 2.25% next. This is the biggest drop since the record start in the 1960s.

because of the war

Andrew Bailey, the Governor of the Bank of England, said the increase in borrowing costs was necessary to prevent inflation from worsening and further influence the standard of living.

He blamed the “consequences of Russian restrictions of gas supplies to Europe “due to rising inflation and said he had” great sympathy “for families in difficulty.

“I recognize the significant impact this will have and how difficult the cost of living challenge will continue to be for families. Inflation hits the least good the hardest, “Bailey said.” If we don’t get the inflation rate to target, it will get worse, “she warned to justify the rate hike.

Britain has been a land of property owners since Margaret Thatcher’s time and every family has to pay monthly your mortgage credit for his house. The rise in rates It will affect them even more.

The Governor of the Bank of England defended the Bank’s track record in fighting inflation. He explained that no one had foreseen the war in Ukraine and that officials “do not engage in politics in hindsight”.

“I would like to challenge anyone to sit here a year, two years ago and say there will be a war in Ukraine, which will have this effect on inflation,” he justified.

Increased rates

The Bank has now raised interest rates six times in a row, bringing them to the highest level since 2009. Inflation is expected to rise will reach a maximum of 13.3 percent, the highest since September 1980 and the worst of the seven largest economies in the world.

Interest rates are raised to raise the cost of money, which reduces demand and, in theory, prices. Inflation is expected stay high for much of next yearbefore returning to the 2% target set by the Bank in two years.

“War, which is driving up the cost of energy around the world, is the main factor fueling inflation in the UK,” Bailey told Today on BBC Radio 4.

The next recession, which it will start at the end of the yearbe as profound as the 2008 banking crisis, but it can last the same time. A recession is defined as two consecutive quarters of economic contraction.

A kingdom in political crisis

The kingdom is in a political crisis, with a prime minister sacked by his Conservative party and a new prime minister expected to be announced on September 5.

In the challenge to the conservative leadership, Chancellor Liz Truss and former Chancellor of Finance of Indian origin, Rishi Sunak, face each other.

Sunak believes that the priority is to lower inflation. Truss, a neo-Thatcherist, believes that taxes should be reduced.

But during a televised debate on Tory leadership on Sky News Thursday evening, Liz Truss, the foreign minister, said the Bank’s recession forecast “it wasn’t inevitable” and that his plan to cut taxes could prevent an economic downturn.

It was challenged by Sunak, who said it was “just wrong” to suggest that the high taxes were causing the economic downturn. “What is causing the recession is inflation,” he added.

Analysts said electricity bills could reach £ 4,200 per year in January after Ofgem announced price limit changes.

Economists have warned that the recession could cost the government 40 billion pounds in lost revenue, which Truss and Sunak had earmarked for tax cuts.

Bailey fiercely defended the Bank’s independence after Truss said he would review his mandate to better contain inflation.

Boris and the Chancellor, absent

Labor accused them of being Boris Johnson and Nadhim Zahawi, the Chancellor of Finance “missing in action” after it became known that both they were on vacation this week. Liam Fox, the former government minister, said he was surprised to hear nothing more from the Chancellor, who, like Boris Johnson, has disappeared.

He was asked on Sky News if he would like to hear from Zahawi and if he was worried “we haven’t seen him”. Fox said: “I don’t think he’s particularly worrying. It is a bit surprising that we hear nothing more from the Chancellor about this. “

Kwasi Kwarteng, Secretary of Commerce, he confessed that he did not know where the prime minister was. Having said that Johnson was on vacation, she replied: “I don’t know where Boris is, but I am in constant contact with him. I just got married. I think he is on his honeymoon. I don’t think many people hold a grudge against him for that. “

When asked where the Chancellor was, Kwarteng said: “I am in contact with him. I only spoke to him this morning on WhatsApp. He is fully aware of what is happening. I’m the Secretary of Commerce, I’m here, I’m in your office, I’m in suit, I’m not on vacation. And we are absolutely focused on trying to address this problem, “he told Sky News.

The main factor causing high inflation and low growth in Britain is rising energy bills. The cost of domestic gas and electricity is expected to rise by a further 75% in October, from the Bank’s previous forecast of 40%, to around £ 3,500 per year.

Paris, correspondent

ap