0:00
0:00
UK urged to brace for economic storm
The Bank of England (BoE) warned on Tuesday that the economic prospects for Britain have deteriorated since the start of the year, calling on the country’s lenders to set aside more capital to absorb shocks in the markets.
“The economic outlook for the UK and globally has deteriorated materially,” the BoE said in its Financial Stability Report. “Prices of essential goods such as food and energy have risen sharply in the UK and globally, and the outlook for growth has worsened,” it added, blaming the crisis on the conflict in Ukraine.
According to the statement, the higher prices, weaker growth and tighter financing conditions will make it harder for households and businesses to repay or refinance debt. “Given this, we expect households and businesses to become more stretched over coming months. They will also be more vulnerable to further shocks,” the central bank elaborated.
Despite a worsening cost-of-living crisis, with inflation heading towards double digits, the regulator expressed confidence that banks were resilient to debt vulnerabilities among households and businesses. It urged them to ramp up their capital buffer to 2%, meaning they will need an additional $13.2 billion of cash.
“The outlook is subject to considerable uncertainty and there are a number of downside risks that could adversely affect UK financial stability,” the BoE said.
Inflation in Britain is expected to climb to 11% later this year and the central bank’s base interest rate could increase to as high as 3% by the end of 2023, economists warn.
According to the statement, the higher prices, weaker growth and tighter financing conditions will make it harder for households and businesses to repay or refinance debt. “Given this, we expect households and businesses to become more stretched over coming months. They will also be more vulnerable to further shocks,” the central bank elaborated.
Despite a worsening cost-of-living crisis, with inflation heading towards double digits, the regulator expressed confidence that banks were resilient to debt vulnerabilities among households and businesses. It urged them to ramp up their capital buffer to 2%, meaning they will need an additional $13.2 billion of cash.
“The outlook is subject to considerable uncertainty and there are a number of downside risks that could adversely affect UK financial stability,” the BoE said.
Inflation in Britain is expected to climb to 11% later this year and the central bank’s base interest rate could increase to as high as 3% by the end of 2023, economists warn.
AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
