While recent figures show that inflation fell to its lowest level in almost a year, the UK is on the brink of a potential recession, the Institute for Public Policy Research (IPPR) has cautioned.
This grim prediction follows the recent surge in UK interest rates, which peaked at a 15-year high of 5.25%. The IPPR is apprehensive that this unprecedented rise could lead the nation into an economic downturn.
Dr George Dibb, who presides over IPPR’s Centre for Economic Justice, said: “While it’s encouraging to witness a drop in headline inflation, particularly given the dip in energy bills, we’re approaching a junction where the threat of recession could soon overshadow inflationary concerns. Many nations have managed to rein in inflation more efficiently than the UK, ensuring that households and workers aren’t unduly affected.”
Moreover, financial experts predict yet another surge in UK interest rates come September, which could reach 5.5%, with some projections pointing towards a 6% rise by the beginning of next year.
Dr Dibb added: “The repercussions of interest rate hikes can take up to 18 months to manifest fully within the economy. By this time next year, we might see the back of ‘pass the parcel inflation’, but these subsequent rate increments might also stifle the economic recovery. Current indicators like plummeting consumer confidence and mounting unemployment are already concerning.”
He continued, emphasising the need to support the vulnerable: “Although inflation rates are declining, actual prices remain elevated. Especially for those in the lower-income bracket, the financial pinch remains acute.
“Other nations, such as Spain, have exemplified how effective measures can combat inflation without plunging the economy into chaos. This involves assisting households and businesses with energy expenses, ensuring businesses contribute their share, and backing renters.”
