Despite previous predictions that the economy might grow between July and September, the central bank now estimates that it will shrink by 0.1%.
This is the Bank’s seventh in a row interest rate increase as it attempts to tackle soaring prices.
The Bank of England said today: “Should the outlook suggest more persistent inflationary pressures, including from stronger demand, the [rate-setting] committee will respond forcefully, as necessary.”
Paul Dales, chief UK economist at Capital Economics, commented: “That new ‘stronger demand’ bit seems like a not-so-subtle reference to the loosening in fiscal policy that’s expected to be announced tomorrow.
“In short, the Bank has indicated it will raise rates further to offset some of the boost to demand from the government’s fiscal plans.”