UK recession warning: The Bank of England is on alert as the British face a year of "disaster".

UK recession warning: The Bank of England is on alert as the British face a year of “disaster”.


New concerns follow the Bank of England’s announcement two weeks ago that it is raising interest rates for the second time in response to the impact of the coronavirus pandemic to 1 percent. Although it did not use the word recession, it said it “is expected to slow down British GDP growth” in the coming financial quarters.

On Monday, Bank of England Governor Andrew Bailey and two members of the institution’s Monetary Policy Committee (MPC) will investigate MPs about the likelihood of a recession in the UK.

The Committee on Finance is also expected to ask whether “the recent decision to raise interest rates has contributed to a worsening economic outlook for the United Kingdom and also to an increase in the cost of living,” Parliament said.

Although the Bank of England may not have used the word R, many other economists conclude that the United Kingdom is heading for a recession – if it is not already.

However, opinions differ on how long and how deep this recession will last.

READ MORE: UK recession warning: Households face ‘slump’

The May MPC report said its forecast “reflects the significant negative impact of the sharp rise in global energy and tradable prices on the real incomes of most UK households.”

He added: “If recent movements prove to be lasting, as projected by central projections, very high levels of global energy prices and tradable goods, of which the UK is a net importer, will inevitably further burden the real incomes of most UK households and many more. Profit margins of British companies.

“It simply came to our notice then. The role of monetary policy is to ensure that this real economic adjustment is conducted in a manner consistent with achieving the 2% inflation target in a sustainable manner over the medium term, while minimizing undesirable output volatility. “

Kallum Pickering, chief economist at Berenberg Bank, said: “If we are unlucky, the United Kingdom is already in the early stages of a recession.

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Paul Dales, the UK’s chief economist at Capital Economics, told the Guardian on Thursday: “Our forecasts that GDP will stagnate in the second and third quarters suddenly seem quite optimistic.

“A reduction in GDP or a recession now seems a little more likely.”

Meanwhile, Torsten Bell, head of the Resolution Foundation, a think tank for living standards, said: “This year is a disaster for poorer households and you will not get through it without answering them.”

One of the first organizations to recognize the real possibility of a recession was the National Institute for Economic and Social Research (NIESR).

On Wednesday, it published its spring outlook, in which it said that the MPC would have to “carefully navigate the treacherous waters caused by the tension between allowing inflation expectations to be anchored on the one hand and drowning the economy on the other. into a deep recession ’.

He added: “Activity is expected to decline in the third and fourth quarters of the year – a ‘technical’ but still relatively shallow recession – with high and persistent inflation, rising interest rates and a tightening fiscal policy combined with limited output growth. “

While the United Kingdom is in a bad way, Europe is said not to be much better off. Julian Jessop, an economist and former Treasury Department adviser, said yesterday (Friday) that while industrial production in the UK was down 0.2 percent, in Europe it was down 1.8 percent month on month.

He also argued that if Britain’s GDP stagnated for the rest of the year – “as is generally expected -” in 2022, growth as a whole would average about 3.5 percent.

“That’s comparable to 3.8 percent FIG.” [projection]The IMF 3.7 percent and the Bank of England 3.75 percent.





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