The Bank of England has raised interest rates from 1.75% to 2.25% – the highest level for 14 years – and warned the UK may already be in a recession.

The central bank had previously expected the economy to grow between July and September but it now believes it will shrink by 0.1%.

It is the Bank’s seventh rate rise in a row as it tries to tame soaring prices.

It takes borrowing costs to their highest since 2008, when the global banking system faced collapse.

Inflation – the pace at which prices rise – is currently at its highest rate for nearly 40 years, leaving many people facing hardship.

Prices are also widely predicted to head higher in October, despite a UK government plan to limit soaring gas and electricity prices for households and businesses.

The Bank now expects the UK economy to shrink between July and September. This comes after the economy already shrank slightly between April and June and will push the UK into recession, defined as when an economy shrinks for two consecutive quarters.

Commenting on today’s Bank of England interest rate rise, Liz Cameron CBE, Chief Executive of the Scottish Chambers of Commerce (SCC), said:

“Today’s latest interest rate rise by the Bank of England highlights the increasing danger posed by rampant inflation, which is being flamed by soaring energy bills and global supply chain disruption.

“As the economy heads into recession, the BoE is right to point to price pressures and labour shortages being a strain on growth for some time to come, as we have been hearing from firms for months.

“Our latest research has indicated record high concern from Scottish businesses over inflation, which is very unlikely to change any time soon. While the energy price cap announcement will provide some short-term relief for firms, all eyes will be on Friday’s fiscal statement from the Chancellor.

“Businesses need to see a plan to tackle the short-term drivers of inflation as well as a long-term strategy to promote growth and investment that gives them confidence for the future, while mitigating the risks of increasing interest rates.”

Read More