Bank of England warned it will ‘totally crash the economy’ over interest rate decision | City & Business | Finance

The Bank of England will “totally crash the economy” if they continue to keep interest rates at their current levels, an economist warns. On Thursday, the Bank announced that it will raise borrowing costs for an eleventh successive time to 4.25 percent from 4 percent.

He said: “At the moment the Bank of England is trying to force interest rates to levels that are completely unknown in the UK in the last 20-plus years.

“The UK economy doesn’t know how to operate in this scenario.

“They are saying that they don’t want interest rates to fall below four percent for some time to come, maybe even five or six years at this level.

“My view is that you can do that but you will totally crash the economy. Households will not be able to pay their mortgages, people won’t be able to pay their rent.

“We have wages lagging way behind inflation at the moment, and the offers being made to people like nurses and rail workers won’t actually help because there are real pay cuts built into them for future years.

“People’s earnings will fall way behind inflation over the next few years.”

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“I think the Bank of England has gone too far. I’m arguing for an interest rate cut of at least 1.5 percent to stabilise the economy and reduce the pressure on the banking system and avoid a banking crisis.

“Secondly, this would make mortgages more affordable meaning people will spend their money again and we can avoid a recession.

“Third, we know inflation is going to fall anyway.

“Do the Bank of England want to leave us in turmoil, or do they want an economy where people can afford food, their mortgages, and their rents?”