The Bank of England's governor has defended the decision to hike interest rates by the greatest amount in almost three decades and insisted there is a “real risk” of surging prices becoming “embedded.”
Andrew Bailey said: "The real risk we're responding to is that inflation becomes embedded and it doesn't come down in the way that we would otherwise expect."
Rates were increased by 0.5 percentage points to 1.75% by the BoE's monetary policy committee, which also forecast inflation could soon hit 13%.
Rising prices could remain at “very elevated levels” during much of 2023, before returning to the BoE’s 2% target the following year.
Bailey urged companies to not issue high pay rises as it would likely exacerbate inflation, telling the BBC that “the people who are least well off [being the ones] who are worse affected because they don't have the bargaining power."
UK inflation currently stands at 9.4%, which is already the highest level seen for over 40 years.
In an overwhelmingly gloomy monetary policy report, the Bank forecast five consecutive quarters of recession starting from this year’s last three months.
This would be as long as the economic downturn seen following the banking crisis of 2008.