08 Jul 2022
The economic outlook for the UK and the rest of the world has 'deteriorated materially', the Bank of England (BoE) has warned.
Energy and fuel costs are rising rapidly around the world, pushing up prices quickly.
However, UK banks are in a position to endure even a severe economic downturn, the BoE said. It told banks to keep more money in rainy day funds to ensure they can 'weather any storm'. The Bank's comments came in its latest Financial Stability Report.
International forecasters such as the International Monetary Fund (IMF) and the Organisation for Economic Co-operation and Development (OECD) have said Britain is more susceptible to recession and persistently high inflation than other Western countries.
Households have come under increasing pressure in recent months, as energy, food and fuel prices soar. In April, domestic energy bills jumped after the price cap increased by 54% to £1,971 for the average household.
Experts believe this could rise again in October to around £2,800, which could help to push inflation up to more than 11%.
The BoE said: 'Commodity price volatility following the Russian invasion of Ukraine has further exacerbated price pressures facing households and businesses, and has had implications for the financial system.'