Banking strains will amplify tightening in credit conditions

Even before the turmoil in the banking sector, UK banks were planning on sharply reducing the amount of credit available to households. The recent strains in the banking sector will amplify the effects of higher interest rates and contribute to a recession. This supports our view that interest rates won’t rise much further and that despite the recent resilience of the economy, real GDP will fall by about 1.0% in the first three quarters of this year.