Bank warns of recession as inflation could pass 10%

The Bank of England warned that the cost of living crisis could plunge the UK economy into recession this year, as it increased interest rates to tackle soaring inflation that is expected to rise above 10% in the coming months.

The bank raised its base rate from 0.75% to 1%, lifting the cost of borrowing to the highest level in 13 years, as it sounded the alarm over the risks from spiralling inflation exacerbated by Russia’s war in Ukraine.

Despite the growing risks to the economy as households endured one of the biggest annual declines in their income for decades, the Bank said a quarter-point rise was warranted to block persistently high inflation from taking hold, as the shock from soaring energy costs rippled through the global economy. The Bank predicted Britain was on track for years of meagre economic growth as people cut back their spending to deal with the heavy blow to living standards.