The Bank of England will add another 50 basis points to Bank Rate next week and take borrowing costs to 3.50%, despite the economy falling into recession, as it battles inflation running at more than five times its target, a Reuters poll found.
The country is facing a winter of discontent as workers from rail staff to teachers and nurses take industrial strike action to demand better pay.said in an interview published on Saturday higher interest rates could lead to a deeper and longer recession, adding there were few signs demands for higher wages risked a wage-price spiral.
"We think it will be a 50 bp rise, taking Bank Rate to 3.50%, with risks weighted towards a larger 75 bp move, rather than a smaller 25 bp one."The U.S. Federal Reserve is also expected to shift down to a 50 bp move this month after four consecutive 75 bp increases, a separate Reuters poll found. Quarterly forecasts suggest the economy shrank 0.2% last quarter and will do so by 0.4% in this one, meeting the technical definition of recession. It will then contract 0.4%, 0.4% and 0.2% in the first three quarters of next year.Those forecasts were little changed from last month but when asked about the risks to their GDP forecasts, 12 of 18 said it was to the downside. Across this year the economy was predicted to expand 4.4% but then contract 0.9% next year before returning to 0.
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