Pound plummets as BoE ignites recession fears by hiking interest rate

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The pound has plummeted after the huge interest rates hike from the Bank of England ignite recession fears, with economists warning there are “tough times ahead”. The Bank’s base rate will rise to three percent from 2.25 percent – highest for 14 years, and decision makers warned that more increases are likely over the coming weeks and months. But pound sterling has plunged following the announcement, piling more pressure onto the already British currency.

Sterling dropped 1.4 percent to $1.123 against the US dollar and was 0.8 percent lower at 1.15 euros.

Naeem Aslam, Chief Market Analyst at AvaTrade, warned: “The pound has lost more momentum on the back of the BOE’s decision. A typical textbook trade is out of the window because currencies usually move higher when a central bank increases rates.”

Homeowners are now bracing for their biggest single shock on their mortgage bills since the 1980s after the BoE hiked interest rates for the eighth time in a row.

The latest increase will add around £3,000 per year on to mortgage bills for those households that are set to renew their mortgages.

But the Bank also warned the UK could be on course for its longest recession since reliable records began in the 1920s.

Gross Domestic Product (GDP) could plunge during for every financial quarter over the next two years, with growth only returning in mind-2024.

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