The UK is facing a recession and 10% inflation as interest rates rise

U.S. markets were also upset after the US Federal Reserve raised interest rates on Wednesday night to fight rising inflation. The technology-focused Nasdaq index fell 5 percent in the strongest fall since 2020.

The bank noted that energy bills will jump another 40 percent in October, in addition to April, up 54 percent as the war in Ukraine raises world energy prices.

The Russian invasion has also raised the cost of food and other raw materials, while China’s zero-covid policy is causing chaos around the world by closing major manufacturing centers.

Mr Bailey said: “I am aware of the problems this will cause for many people in the UK, especially those on the lowest incomes, often with little or no savings, who are most affected by rising prices for basic necessities such as food and energy.

“The economy has recently been exposed to a series of very big shocks. Another such shock is the Russian invasion of Ukraine.

This will derail the recovery from Covid, causing the economy to shrink in the last three months of the year, the Bank said.

GDP will be 0.25 percent lower next year than this year, forecasters predict, and the anemic recovery will drag on into the middle of the decade, as the country risks falling into so-called stagflation, where prices are rising but economic growth is severely limited.

Recent polls show Labor has about a six-point advantage over the Torieswhile two-thirds of the public feel that Mr Johnson is personally doing a poor job.

A majority of voters (57 per cent) believe the economy is the most important political issue facing Britain.

On Thursday, it was reported that some Tories believe Johnson could call a general election this year in hopes of avoiding a worse turnout in the 2024 polls if the economy continues to be in trouble.

But Oliver Dowden, chairman of the Conservative Party, told lawmakers that “there is no chance” the election would take place so early.

Mr Bailey and his colleagues in the Monetary Policy Committee (MOC) voted to raise interest rates from 0.75 to 1 per cent, further exacerbating borrowers’ problems in the country.

Banks including HSBC, TSB and Santander immediately raise interest rates on their variable rate mortgages to take advantage of the raise and add £ 50 a month to the cost of a typical £ 250,000 loan.

This is the fourth consecutive increase in interest rates at MPC meetings and the increase in interest rates to the highest since 2009, when the bank reduced borrowing costs to combat the financial crisis. This is also the first rate increase on election day since 2004.

The governor said that this should ultimately help bring inflation back to the 2% target in the coming years, as there is the risk of higher energy and food prices spreading across the economy create a long-term problem.

Markets expect interest rates to reach 2.25 percent by the end of the year, another blow to borrowers.

Mr Bailey noted that the economy is on a “narrow path” as the bank seeks to raise borrowing costs enough to lower inflation without going too far and pushing the country into recession.

He said the Bank could essentially do nothing about the huge pressure being put on world energy prices.

Mr Bailey told Sky News: “It’s very embarrassing, I don’t want to bother with it. But the fact is that we are facing historically great upheavals.

“Let’s face it, who among us thought there would be a war like the one we see in Europe?” That’s awful. “