The U.K. economy contracted in the three months through September, as high energy prices and rising interest rates mark the beginning of what policy makers expect will be a long-lasting recession that is likely to spread across Europe in coming months.
The country’s gross domestic product was 0.2% lower in the third quarter compared to the three months through June, the U.K.’s Office for National Statistics said on Friday. That was the first quarter-to-quarter decline in output since the first three months of 2021, when large parts of the economy were in lockdown to contain a surge in Covid-19 infections.
The Bank of England last week forecast the recession will last through the end of next year, and possibly beyond. But despite the downturn, the central bank said it is likely to raise its key interest rate again to combat a surge in consumer prices that saw the annual rate of inflation hit 10.1% in September.
Adding to pressure on the U.K. economy, the government will next week announce a series of tax hikes and spending cuts in an effort to narrow a shortfall in government finances.
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