Brexit is hitting the economy ‘faster’ than expected, says Bank of England boss

The Bank of England announced at noon that it has raised interest rates for the tenth time in a row. Decision-makers at the Bank’s Monetary Policy Committee (MPC) decided to raise the Bank Rate to 4% from 3.5% to bring down persistent double-digit inflation.

The bank also noted that while the UK is still heading into recession, the economic downturn may be shallower and shorter than previously expected.

Speaking after the Bank’s announcement, Chancellor Jeremy Hunt said he supported the decision to raise rates. He said: “Inflation is a stealth tax that is the biggest threat to living standards in a generation, so we support the Bank’s action today to ensure we succeed in halving inflation this year”.

In the post-announcement press conference, Brexit was cited as a factor affecting the UK economy alongside a tight labor market, a greater dependence on gas than other countries and a greater pass-through of interest rates to borrowers.

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In response to questions from reporters, the Bank of England’s deputy governor for monetary policy, Ben Broadbent, said the impact of Brexit on the economy is coming faster than first expected.

Mr Broadbent said: “Brexit… is something that is pulling our potential output in our country and that has been our assessment for many years. We haven’t changed our estimates of long-term effects, but we’ve moved some of them forward and we think they’re probably coming faster than we first expected.”

He added: “Yes it is [Brexit] There is some impact on growth, although ultimately not a bigger impact than we assessed a few years ago. Based on the number of trades and some magnitudes for the number of investments, we think that these effects are coming faster than initially imagined”.

In response to the rate hike, shadow chancellor Rachel Reeves argued that the UK was “stuck in a global slowdown”.

He said in a statement: “With households already paying a Tory mortgage penalty, households across the country will be worried about what rising interest rates mean for them today. The reality is that with the Tories growth is on the floor, families are worse off and we are stuck in the global slow lane. We must not continue down this path of managed decline when Britain has so much potential for growth and prosperity.

“Built on the bedrock of economic stability, Labor will tackle the crisis of living and grow our economy, so we can create good, new jobs and lead the industries of the future”.

The Liberal Democrats described the tenth consecutive interest rate hike as “a hammer blow to hard-working families across the country”.

The party said on Twitter: “Responsibility lies squarely with this Conservative government whose stupid budget last year sent our economy into a spiral and who has completely failed to reduce inflation”.