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In our Market Monday insights, Prosperity Investment Management examines the latest developments across the globe's biggest financial markets - providing you with all the latest information you need to know.
The governor of the Bank of England has defended its decision to raise interest rates, saying there is a major risk that soaring prices may become embedded.
Interest rates rose to 1.75% - the biggest rise in over 27 years - with inflation values now set to hit more than 13%.
The UK is forecast to fall into recession this year, with the longest downturn since 2008 predicted. Increasing interest rates is one way to try and control inflation as it raises borrowing costs.
This in turn should encourage people to borrow and spend less. It can also encourage people to save more. However, many households will be pressured further following the interest rate rise, including some mortgage-holders.
UK inflation - the rate at which prices rise - is currently at 9.4%, which is the highest level for more than 40 years.
But the Bank has warned it could peak at more than 13% and stay at ‘elevated levels’ throughout much of next year, before slowly returning to the Bank's 2% target in 2024.
The main reason for the high inflation and low growth is soaring energy bills, which have been driven by Russia's invasion of Ukraine.
Households have also been hit by higher petrol, diesel and food costs, with real post-tax household incomes forecast to fall this year and into the next.
At its current rate, the economy is forecast to shrink in the final three months of this year and keep shrinking until the end of 2023.
The expected recession would be the longest downturn since 2008, when the UK banking system faced collapse, bringing all lending to an abrupt halt.
The slump is not set to be as deep as 14 years ago, but may be prolonged for a similar amount of time.
