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UK economic outlook has deteriorated, Bank of England warns

UK economic outlook has deteriorated, Bank of England warns

UK economic outlook has deteriorated, Bank of England warns

UK economic outlook has deteriorated, Bank of England warns. (credits: Google)

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  • Bank of England issued a warning that the economic outlook for the UK “materially deteriorated”.
  • “Costs of energy and gasoline are rising quickly globally, which causes prices to increase overall.
  • The Bank asserted that UK banks are prepared to withstand even a severe economic slump.
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The Bank of England has issued a warning that the economic outlook for the UK and the rest of the world has “materially deteriorated.”

Costs of energy and gasoline are rising quickly globally, which causes prices to increase more quickly overall.

The Bank asserted that UK banks are prepared to withstand even a severe economic slump.

In order to ensure they can withstand any storm, it advised banks to maintain more money in rainy day accounts.

The Bank made these observations in its most recent Financial Stability Report.

British forecasters claim that compared to other Western nations, which are all dealing with shocks from the energy and commodities markets, Britain is more vulnerable to recession and persistently high inflation.

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The Bank stated that while the UK banking industry was well-positioned to weather a severe downturn, banks needed to boost the amount of money they set aside to withstand shocks. In place of the customary 1 percent, banks will be forced to set aside a sum equal to 2 percent of their assets as a buffer beginning of next year.

According to the Financial Policy Committee, depending on how the global economy turns out, the rate may change in either direction.

As the cost of fuel, food, and other necessities has skyrocketed in recent months, pressure on households has increased.

After the average household’s price cap was raised by 54% to £1,971 in April, home energy costs soared.

According to experts, this might increase once again in October to around £2,800, which could later this year contribute to an increase in inflation of more than 11%.

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The Bank stated that the “volatility in commodity prices following Russia’s invasion of Ukraine has further exacerbated pricing pressures affecting families and businesses, with repercussions for the financial system.”

Some families might experience debt problems. The majority of mortgages—about 80%—have fixed interest rates right now, but 40% of them are up for renewal this year or the year after, which might result in higher costs for these households.

According to the Bank, “tighter financial conditions and decreased real earnings will impact on the affordability of debt for consumers, firms, and governments in many countries, increasing the risks from global debt vulnerabilities.”

Nevertheless, the Bank claimed that financial institutions were resilient to debt vulnerabilities among consumers and businesses, despite mounting strain on household budgets.

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