The Bank of England (BoE) has warned that the UK is set to fall into the longest recession the country has seen since records began in the 1920’s.
Earlier this year BoE Governor Andrew Bailey (pictured) said the UK was facing a short sharp recession however the central bank is now predicting a more prolonged affair.
The warning came as the Bank lifted interest rates to 3% from 2.25%, the biggest jump seen since 1989.
Bailey warned that there is a “tough road ahead” for both the UK’s economy and households struggling during the cost of living crisis.
He said: “We do understand the difficulties of the situation we’re in and the difficulties mortgage-holders face. If we don’t take action to get inflation down, things will get worse.”
But he added that fixed rate mortgages “should not need to rise as much as they have done”.
The BoE’s forecasts have predicted a two-year recession, which while it will be the longest it will not be the deepest on record.
It expects inflation to peak at 11% and unemployment at 6.5% – unemployment currently stands at 3.5%.
It anticipates that interest rates will peak at 5.25%.
