The Bank of England raised the cost of borrowing by 50 basis points to 1.75%, the sixth time the central bank has raised rates since December, and following recent hikes by the European Central Bank and Federal Reserve to control uncontrolled prices.
The central bank said in a press release on Thursday that inflationary pressures had “intensified significantly” in recent weeks.
“This largely reflects a near-doubling of wholesale gas prices since May, due to Russia’s tightening of gas supplies to Europe and the risk of further curbs,” he said.
The Bank of England has also forecast that inflation will rise above 13% in the autumn, when energy bills are due to rise, and that it will “remain at very high levels for much of 2023”.
But the Resolution Foundation, a think tank, said on Wednesday it expects energy costs to push consumer price inflation past 15% next year.
Salary increases are not maintained. Real wages for UK workers suffered their biggest fall in more than two decades between March and May, official data showed last month. Britons have been tightening their belts in response, spending less at supermarkets and ditching their streaming subscriptions.
Global natural gas prices began rising last year as global economies reopened their pandemic shutdowns, leading to a surge in demand. Soaring costs have contributed to consumer prices.
Russia’s invasion of Ukraine in late February—and subsequent disruptions in oil and gas supplies—has only made matters worse, helping to push fuel prices to record highs. UK households are struggling. The average annual energy bill has risen 54% this year to £1,900 ($2,300), with a further rise almost certain. According to research firm Cornwall Insight, the average annual bill for millions of households will rise by a further 83% from January to £3,600 ($4,380). That’s £300 ($365) a month spent on gas and electricity.
Average energy bills in the UK could top £500 ($613) for January alone, according to a new report from consultancy BFY Group.
Anti-poverty activists have been sounding the alarm for months.
About two-thirds of all low-income families have gone without essentials like heat or a shower this year, according to a June report from the Joseph Rowntree Foundation.
A looming recession could make matters worse, leading to a wave of job losses. Fears of an economic slowdown intensified in June when the Organization for Economic Co-operation and Development said it expected the UK economy to stagnate next year, the only G7 nation to he did