LONDON (BERNAMA) – The British economy saw inflation finally abate in 2023 but could still finish with a recession and more pressure from the full impact of the barrage of interest rate hikes, with experts warning that the economy has been left on a “knife edge” heading into 2024, reported German news agency dpa.
Inflation became the key battle ground for both the Bank of England and Prime Minister Rishi Sunak in 2023 as soaring prices threatened to inflict long-lasting damage, sparking industrial action on a scale not seen since the 1970s.
In January, Sunak made it one of his five key pledges to halve inflation by the end of the year.
Charged with the seemingly impossible task to bring inflation back down to its two per cent target, the Bank continued its relentless campaign of interest rate increases, which took borrowing costs to levels not seen for more than 15 years.
Homeowners were hit with 14 hikes in a row, with rates reaching 5.25 per cent in August before the Bank hit the pause button as inflation beat a retreat.
Having started the year at 10.1 per cent in January, inflation fell sharply and by October it eased back to 4.6 per cent, allowing Sunak to declare early victory in achieving his goal.
Inflation continued its steep descent in November, dropping to 3.9 per cent as fuel prices fell and increases in food costs slowed.
But Bank governor Andrew Bailey tempered the government’s cheer, warning that the battle with inflation was far from over, with still a long way to go before coming back down to the two per cent target.
Rather than being driven by policy actions, much of the sharp pullback was also largely driven by this year’s lower energy price cap compared with the GBP2,500 (USD3,180) limit set a year ago.
