The Bank of England provides for 13 % inflation and a recession at the end of 2022. It nevertheless increased its key rate to 1.75 %, Thursday, August 4, in an attempt to curb the prices.
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In October 2021, the maximum ceiling of gas and electricity notes in the United Kingdom, fixed by the regulator, was 1,277 pounds (1,527 euros) per year. In April 2022, it increased to 1,971 pounds, a leap of 54 %. In October, its future level, which is not yet officially announced, should reach “around 3,500 pounds”, according to the governor of the Bank of England, Andrew Bailey. This represents a quasi-skill of energy bills in one year for British homes.
The energy shock is global, but the latter, for lack of a price shield or equivalent system, are hit hard. “Families have faced an increase in unprecedented prices for a generation,” observes Jack Leslie, an economist at Resolution Foundation, a reflection group. In June, inflation reached 9.4 % over a year, at the highest for forty years.
Thursday, August 4, the Bank of England drawn the consequences. It now provides an inflation of 13 % in the fourth quarter and estimates that the country’s economy will enter a recession over the last three months of 2022. At the same time, it tries to stop the prices, at the risk of Gripper growth a little more: it increased its interest rate for half a point, to 1.75 %. This is the sixth rise in a row, and the strongest carried out suddenly since 1995.
high level of inequality
This dark painting is the direct consequence of the invasion of Ukraine by Russia in late February. “Since May [during the previous forecast of the Bank of England], the wholesale prices of the gas have almost doubled because of the restrictions of supplies from Russia,” said Bailey.
The difficult situation of the United Kingdom is far from unique. In June, inflation in the United States was 9.1 % and that of the euro zone, 8.6 %, at a level close to that of across the Channel. Central Europe or Germany are much more exposed to Russian gas cuts than the British, which are mainly obtaining in the North Sea. In addition, many economists also predict a recession in the euro zone and the United States in the coming months.
The United Kingdom nevertheless has a peculiarity: the poorest are particularly exposed to energy costs. On August 3, the International Monetary Fund published a study measuring the impact of the energy shock for the 20 % of the richest homes and the 20 % most fragile across Europe. In France, Finland or Sweden, the increase in the cost of living is similar for the two groups, around 4 %. In the United Kingdom, it is 7 % for the wealthiest and 16 % for the most disadvantaged. Only Estonia displays such a broad gap.
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