The Bank of England hiked interest rates by 50 basis points, its largest single increase since 1995, and projected the U.K.'s longest recession since the global financial crisis.
In a news conference following the announcement, Bank of England Governor Andrew Bailey said the shock of"There is an economic cost to the war, but I have to be clear, it will not deflect us from setting monetary policy to bring inflation back to the 2% target," he added.U.K. inflation hit a new 40-year high of 9.4% in June
Analysts had been keen to assess the bank's language, particularly its previous commitment to act"forcefully" on inflation, and the MPC retained that language in Thursday's report. The bank said that it intends to start active government bond sales worth approximately £10 billion per quarter from September, subject to a final green light from policymakers.The bank issued a dire outlook for economic growth, suggesting that the latest gas price rise has led to another"significant deterioration" in the outlook for activity in the U.K. and the rest of Europe.
The forecast warns of a peak-to-trough fall in output of 2.1%, with the economy beginning to shrink in the fourth quarter of 2022 and contracting throughout 2023.
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