UK is already in a recession, new data from Bank of England indicates

The Bank of England has said the UK is already in recession. Photo: PA

Experts at the Bank of England (BoE) have said that UK economy is already in recession after gross domestic product (GDP) shrank for the second straight quarter.

Official figures from the Office for National Statistics show the economy shrank 0.1% in the three months to June.

Members of the Monetary Policy Committee now believe the economy continued to shrink by 0.1% in the quarter to September. The Bank had previously expected the economy to grow during the period.

That would would push Britain into a technical recessions — defined as two straight quarters of economic decline.

Read more: Bank of England hikes UK interest rates by 0.5% to 14-year high

It comes as Threadneedle Street delivered its biggest rate hike since November 2008 on Thursday, after hiking rates to a 27-year high in its previous meeting.

Markets had been betting the central bank would follow its US counterpart and lift rates by a larger 75 basis points, but the Bank settled on another 0.5% hike to 2.25%.

Instead the Bank’s Monetary Policy Committee (MPC) decided to raise rates to 2.25% – their highest since November 2008 — from 1.75%, in an effort to grapple big increases in the cost of living.

In committee minutes, it said the “tight labour with wage growth and domestic inflation” above targets called for a “forceful response”.

The decision to lift rates is a bid to keep inflation to bring inflation, currently running at 9.9%, back to its 2% target.

Read more: How BoE’s rate hike will impact mortgages and house prices

In the September meeting, the MPC also said inflation is now not due to soar as high as previously expected after government announced plans to freeze energy prices for households earlier this month.

Consumer Price Index (CPI) inflation is now set to peak at “just under 11%” in October, marking the highest inflation the nation has witnessed since January 1982.

Five members of the Bank of England’s Monetary Policy Committee voted to raise its interest base rate from 1.75% to 2.25% while three voted for a steeper increase to 2.5%, the Bank said.

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It said that uncertainty in the outlook for energy prices has fallen after the government announced it would cap bills at £2,500 for the average household for two years.

Policymakers also voted unanimously to reduce quantitative easing by £80bn over the next 12 months to £758bn.