More inflation, slower growth: the economic consequences for the UK of the conflict in Ukraine. Read more from the most recent Economic Update from Mark Berrisford-Smith, Head of Economics, Commercial Banking, HSBC UK.
Key points
The Russia-Ukraine conflict has delivered another negative economic shock to the global economy, just as most countries have learned to live with Covid-19. Higher prices for many commodities are making an already-difficult inflation situation even worse.
In the UK, inflation is now expected to peak at an annual rate of over 8% in April, and will remain higher for longer, with little likelihood of a noticeable decline until the spring of next year. The cost-of-living squeeze faced by many households will therefore intensify in the coming months, precipitating a slowdown in the pace of economic growth in the second half of this year. But the fall in disposable incomes may be mitigated by the savings accumulated during the pandemic, while it’s also likely that the government will offer more fiscal support in the autumn.
The Bank of England is expected to raise UK Bank Rate three more times in coming months to reach 1.50% in August. But the risks of getting it wrong have increased – either doing too little, or doing too much.
To read the full report, click here.