Recession regression

The man's face is solemnBeing serious rather than cheerful or amusing. as he faces a flock of journalists. One of them asks him if he is prepared for Britain to go into a bleak recession. "We will do what is necessary to bring inflation down to target," he responds gravely.

On Thursday, the Bank of England announced that interest rates would be lifted for the thirteenth consecutive time - to 5% - in a bid to combat this persistent inflation.

And although many expected interest rates to rise, few predicted that they would rise so quickly. When interest rates rise, people choose to save rather than to spend their money. Demand for goods and services should decrease, so companies cut prices to make their items more tempting.

But high interest rates also have a dark side. Many think they could lead to a recession.

It will not come as a surprise. Recent polls have shown that a majority of the public thinks that the UK is already in a recession.

A recession could make the economy even more bleak. Household living standards may fall, whilst child poverty and debt will likely rise.

Some say we must get through the bad to get to the good. One economist, who advises the Chancellor of the Exchequer Jeremy Hunt, stated that "creating a recession" is the only way to effectively curb inflation, as it will prompt companies to keep both prices and salaries stable.

But for others, our reliance on the Bank of England to raise interest rates is a sign of just how desperate we are. Interest rates are often described as a "blunt instrument" - a tool which may knock down inflation, but does nothing to tackle its root causes.

Unfortunately, many people also think that ordinary people are not feeling the benefit of saving because basic goods and services are so expensive. Meanwhile, banks are recording rapidly increasing profit margins.

Yes: This is the first stage in bringing the cost of living crisis to an end. We need to weather the higher interest rates in order to curb inflation, which will lay the basis for a new forthcoming period of economic growth.

No: We have rarely experienced such bleak economic conditions in recent history. This should be seen as a low point, with spiralling child poverty, food poverty and debt hitting ordinary people hard whilst large companies make even larger profit margins.

Or... Nothing lasts forever. To an extent, we are dependent on the global economy and cannot recover fully until there are more favourable conditions elsewhere. But despite recent shocks, stability is in sight.