The Bank of England is expected to raise interest rates by 75 basis points on Thursday, the biggest increase since 1989, as the possibility of an economic recession deepens.
With UK inflation reaching a 40-year high of 10.1% last September, the bank is expected to raise its key interest rate for the eighth consecutive time amid expectations that weak growth momentum and a significant tax shift -fiscal policy will soften calls for more monetary tightening.
After new Prime Minister Rishi Sunak reversed his predecessor Lisa Terrace’s controversial tax cut, this means that fiscal and monetary policy are no longer going in opposite directions.
On Monday, economists at Goldman Sachs cut their UK growth forecast for 2023 from -1% to -1.4% year-on-year, noting that the residential and commercial energy spending support scheme is likely to be less generous under Sunak’s government.
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