UK recession warning: Economy on brink as Bank of England hikes interest rates

Professor Stephen Millard, NIESR deputy director for macroeconomics, said: “The UK economy is heading into a period of stagflation with high inflation and a recession hitting the economy simultaneously.”

He called on the BoE to try to get inflation under control – interest rates of three percent will probably be necessary for that – and for the new chancellor to support households hit by the recession and cost-of-living squeeze.

The report called for the Government to increase Universal Credit payments by £25 per week for at least six months from October, which would cost around £1.4 billion, and also to increase energy bill relief payments from £400 to £600 for 11 million low-income households, costing £2.2 billion.

The research shows that between the impact of inflation and the refusal of the Government to raise benefits in line with inflation, the 10 percent poorest households will be around five percent worse off, despite the support they have been promised on energy bills.


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