Bank of England raises rates by half point, the most in 27 years

Hike to 1.75% comes as recession is expected to begin in Q4 and last throughout next year

The Bank of England (BOE) yesterday unleashed its biggest interest rate increase in 27 years as it warned that Britain is heading for more than a year of recession under the weight of soaring inflation.

The half-point increase to 1.75 per cent was backed by eight of the bank’s nine policymakers, who also kept up a pledge to act forcefully again in the future if needed, potentially putting similar increases on the table for coming meetings.

The move came as officials predicted that recession will begin in the fourth quarter and last all the way through next year. That is the longest slump since the financial crisis of 2008 to 2009. Officials expect the economy to shrink by about 2.1 per cent in total.

The BOE also boosted its forecast for the peak of inflation to 13.3 per cent in October amid a surge in gas prices, and warned that price gains will remain elevated throughout next year. That will sharpen a costof-living crisis that will see real disposable incomes fall more than at any time in around 60 years.