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Rishi Sunak Warns of Possible UK Recession in 2024

In a recent statement, UK Prime Minister Rishi Sunak sounded the alarm about a potential recession looming over the country in the coming year.
UK Prime Minister Rishi Sunak on an occasion at 10 Downing Street in London on October 26, 2022. (REUTERS/HENRY NICHOLLS via VOA INDONESIA)
UK Prime Minister Rishi Sunak on an occasion at 10 Downing Street in London on October 26, 2022. (REUTERS/HENRY NICHOLLS via VOA INDONESIA)


Introduction

In a recent statement, UK Prime Minister Rishi Sunak sounded the alarm about a potential recession looming over the country in the coming year. The soaring inflation rates have pushed interest rates above 5 percent ahead of the next general election. This sets the stage for further increases in mortgage and loan costs for millions of households, with economists predicting that the Bank of England may be compelled to steer the UK economy into a recession to tame inflation.


The Concerning Economic Developments

1. Chancellor Jeremy Hunt Criticized for His Stance

At the end of a troubling week for the economy, Chancellor Jeremy Hunt faced severe criticism for his apparent assertion that this is a price worth paying. Families in the UK have been enduring an unrelenting cost-of-living crisis. "Hardly anyone feels better off after 13 years of this government. I am very concerned about mortgages. People are struggling to pay bills, and mortgages are a significant part of that," said Keir Starmer, leader of the Labour Party, as reported by The Guardian.


2. The Danger of Engineered Recession

Jagjit Chadha, Director of the National Institute of Economic and Social Research, stated that if interest rates continue to rise, the UK is at risk of engineered recession. Financial markets have driven up the borrowing costs for the UK government to their highest level since the ill-fated tenure of Prime Minister Liz Truss. The Prime Minister's ability to fulfill his inflation-related promises this year has also come into question. It remains one of his five key pledges.


3. Sunak's Promise and the Role of the Bank of England


Andrew Sentance, a former policymaker at the Bank of England, argued that Sunak's promise was a mistake, as it has been the responsibility of the central bank since its independence was granted by Gordon Brown in 1997.


Current Inflation Figures and Predictions


Official figures released this week indicate that the UK's annual inflation rate fell less than anticipated, standing at 8.7 percent in April, with the stability of energy prices partially offset by surging food prices.


Financial markets are now betting that the Bank will raise its benchmark interest rate to 5.5 percent from the current 4.5 percent before the end of the year.


Conclusion


As the UK faces the potential threat of a recession in 2024, Prime Minister Rishi Sunak's warning highlights the growing concerns about the country's economic stability. With inflation rates soaring and interest rates on the rise, the burden on households is becoming increasingly challenging. As the Bank of England grapples with the complex task of taming inflation while avoiding an engineered recession, the future of the UK's economy hangs in the balance.

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