London Daily

Focus on the big picture.
Thursday, Jul 10, 2025

Cost of living pain still to come for millions despite Bank of England's rosier outlook

Cost of living pain still to come for millions despite Bank of England's rosier outlook

The economy is not doing as badly as previously thought and the bank has dramatically changed its outlook. The problem is that it's hard to revel all that much in comparative good news when you look at the absolute numbers.
It is saying something that the Bank of England has just delivered its biggest economic upgrade in the history of the Monetary Policy Committee, yet the UK is still effectively flatlining.

But that is the paradox facing the economy at the moment.

On the one hand, the outlook for the country as a whole is considerably rosier than it was only a few months ago.

If you follow these forecasts you may recall that late last year the bank said that the UK economy might well face the longest recession in modern history.

But now it has dramatically changed its outlook.

Now it believes that the economy will not shrink at all in any of the coming quarters.

A few months ago it suggested that the UK economy wouldn't regain its pre-pandemic size for many years; now it believes it will hit that watershed at the end of this year.

Not long ago it thought the unemployment rate would rise above 6% by 2025; now it thinks it will be below 4%.

This is very good news.

The problem is that it's hard to revel all that much in comparative good news when you look at the absolute numbers.

Good news needs to be put in perspective

Let's put things into perspective.

Up until a few years ago "trend growth" was above 2%. In other words, in a "normal" year you might expect the economy to grow by maybe 2-2.5%.

Now look at the latest Bank forecasts: growth of a quarter percentage point this year, three-quarters of a percentage point next year, and the same again in 2025.

This is very weak growth.

Now consider what's happening beneath the surface.

Every household in the country is facing the pain of rising prices, but for some, the impact is worse than for others.

Some people, especially higher-income households, have considerable savings built up during the pandemic.

Many older households have already paid off their mortgages, to the extent that the proportion of homes without mortgages is higher than ever before.

Yet for those households who do not benefit from these financial cushions, life is tough - and getting tougher.

Why there is more pain to come

Only around a third of the eventual "pain" of higher interest rates has yet been felt, because most mortgage payers have yet to refix their loans onto higher rates.

But that will happen for millions in the coming months.

Moreover, one of the other key changes in the bank's forecasts today is that food inflation is likely to be considerably higher in the coming years than previously expected.

While food producers' costs are beginning to come down, the prices we pay are still rising fast.

Some have characterised this as "greedflation" but economists say these companies' margins remain compressed.

Even so, even after adjusting for the bank's new, less gloomy forecasts, it's hard to envisage a return of the feelgood factor in the coming months.

The economy is not doing as badly as previously thought - this is a cause for reassurance.

But for most households, the pressures from rising living costs are still intensifying rather than abating.
Newsletter

Related Articles

0:00
0:00
Close
Severe Heatwave Claims 2,300 Lives Across Europe
NVIDIA Achieves Historic Milestone as First Company Valued at $4 Trillion
Declining Beer Consumption Signals Cultural Shift in Germany
Linda Yaccarino Steps Down as CEO of X After Two Years
US Imposes New Tariffs on Brazilian Exports Amid Political Tensions
Azerbaijan and Armenia are on the brink of a historic peace deal.
Emails Leaked: How Passenger Luggage Became a Side Income for Airport Workers
Polish MEP: “Dear Leftists - China is laughing at you, Russia is laughing, India is laughing”
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Weinstein Victim’s Lawyer Says MeToo Movement Still Strong
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Labour Expected to Withdraw Support for Special Needs Funding Model
Leaked Audio Reveals Tory Aide Defending DEI Record
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
Richard Kemp: I Felt Safer in Israel Under Attack Than in the UK
Cyclist Says Police Cited Human Rights Act for Riding No-Handed
China’s Central Bank Consults European Peers on Low-Rate Strategies
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Musk Battles to Protect Tesla Amid Trump Policy Threats
Air France-KLM Acquires Majority Stake in Scandinavian Airlines
UK Educators Sound Alarm on Declining Child Literacy
Shein Fined €40 Million in France Over Misleading Discounts
Brazil’s Lula Visits Kirchner During Argentina House Arrest
Trump Scores Legislative Win as House Passes Tax Reform Bill
Keir Starmer Faces Criticism After Rocky First Year in Power
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
×