The global recession is spreading, and the UK economy is probably already in it, and the Bank of England should refrain from raising interest rates further, says economist Danny Blanchflower, who served on the Bank’s Monetary Policy Committee from 2006 to 2009. In an interview with the Today program on BBC Radio, he criticized the decision of the US Federal Reserve to raise the key rate by 75 basis points at once. In his opinion, this move is likely to cause a recession in the US economy.
Earlier, Blanchflower called “absolute madness” the proposal of Patrick Minford, economic adviser to British Foreign Secretary Liz Truss, to sharply raise the key rate in the country, possibly up to 7%.
It is expected that next week the Bank of England, in an attempt to curb inflation, will hold the highest key rate increase in the last 27 years, writes Bloomberg. Prices in the country are rising at the fastest pace since 1982. However, according to Blanchflower, the slowdown in the economy and unemployment pose a greater threat than rising prices.
“In 2008, people were denying that a recession was coming and saying that all we need to worry about is inflation. But a 1% rise in unemployment causes people much more pain and sadness than a 1% rise in inflation,” he said.
Economists estimate that UK GDP contracted by about 0.5% in the second quarter, and there are growing doubts that output will subsequently recover, given the magnitude of the cost-of-living crisis.
Recently, the opinion has been repeatedly expressed that the world’s largest economy – the United States – has already fallen into recession. One of the first to announce this in mid-May was the well-known businessman Elon Musk. He was later supported by analysts from the Wells Fargo investment group. And a week ago they were joined by Larry Fink, Chairman and CEO of the world’s largest asset management company (worth about ten trillion dollars), BlackRock.