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UK inflation near its 40-year peak was expected to continue to “gradually” decline in the first half of 2023, but pressures persist.

“High energy prices putting pressure on real incomes and interest rate developments continue to weigh on demand,” Bailey said.

“Therefore, economic output is expected to decline slightly over 2023-2024.

“Still, this is a much shallower drop than expected,” the governor added.

The BoE expects gross domestic product to contract by 0.5% this year and 0.25% next year.

That compared with previous forecasts for GDP contractions of 1.5% and 1%, respectively.

cost of living crisis

Central banks around the world are trying to lower energy and food prices, which rose in the wake of Russia’s invasion of Ukraine a year ago.

Thursday’s announcement is likely to exacerbate the UK’s cost of living crisis as commercial lenders raise interest rates on credit cards, mortgages and other loans.

This will put further pressure on cash-strapped Britons, who are bowing to rampant consumer prices, as well as rising household and transport costs.

The UK was hit by a strike this week as workers in the public and private sectors protested against wages not keeping up with inflation.

500,000 people quit their jobs The country’s largest strike in more than a decade has paralyzed transportation networks and left thousands of classrooms empty.

UK inflation eased to 10.5% in December, more than five times the BoE’s official target level of 2%.

The BoE started tightening monetary policy in December 2021, with interest rates at a record low of 0.1%.

The surge in interest rates over the past 14 months has provided a huge boost for those with enough spare cash to save in financial institutions. Bank of England raises interest rates 10 times in a row

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