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Like most other central banks in Washington, Frankfurt, or Oslo, the authorities are trying to curb inflation which in the United Kingdom has reached an all-time high. The Bank of England also predicts a recession from this third quarter.
The outlook for the UK economy is not rosy. The Bank of England forecasts that in the third quarter of 2022, growth will actually decline by 0.1%. In question, a drop in production, after a first decline in the previous quarter.
Ironically, the funeral of Queen Elizabeth II, in particular Monday, September 19, declared a day off, contributes to this. Inflation has reached levels not seen for forty years in recent months. With this increase of 50 basis points, key rates go to 2.25%. This is less than what the markets expected, with their eyes riveted on the sharp rise in Washington the day before.
Inflation expected below 11%
But this time again, the Bank reserves the right to react forcefully if inflation worsens. From now on, it is expected below 11% in October against 13% before the election of Prime Minister Liz Truss, on a promise of lower energy costs.
Tomorrow Friday September 23, the new Minister of Finance, Kwasi Kwarteng, will detail the aid program planned by the government. The Central Bank will study the implications at its next meeting in November.