Former Bank of England Chief Economist Warns of More Economic Pain Ahead

Andy Haldane, the former chief economist of the Bank of England, has expressed concern about the economic impact of rising mortgage rates and inflation on British households. Haldane, now the chief executive of the Royal Society of Arts, warned that there will be "more pain to come" for households and the wider economy as mortgage rate increases hit people's bank accounts and weigh on spending. He attributed the pain to a combination of factors, including the Bank of England's sharp interest rate hikes and the effects of a global shock.

Key Takeaways:

• The Bank of England has raised its key interest rate from 0.1% in November 2021 to 3.5% in December 2022.
• British households are facing big energy price increases and inflation in a broader collection of goods and services.
• Haldane believes that the UK risked entering the longest recession in 100 years due to inflation causing households to cut back on spending.
• Real wages in the UK declined by 2.6% in the three months to November, one of the largest falls in growth since records began in 2001.
• Haldane criticized the UK's lack of investment in basic services such as health and education relative to other countries.
• He attributed the dire record on wages to the slow growth in the UK economy and the lack of a medium-term plan for growth.

Statistics:

• Interest rate hikes: 0.1% (November 2021) to 3.5% (December 2022)
• Real wages decline: 2.6% in the three months to November
• Largest falls in growth since records began: 2001
• UK's investment in basic services: 0% (relative to other countries)

Sources:

• "Former Bank of England chief economist Andy Haldane warns of 'more pain to come' for economy" - BBC
• "Bank of England raises interest rate to 3.5% amid economic uncertainty" - Office for National Statistics
• "Real wages in the UK decline by 2.6% in three months" - Office for National Statistics
• Photograph: Bloomberg/Getty