Bank of England says UK economy is coping with higher rates

The Bank last month raised rates to 5% that had stood at 0.1% at the end of 2021, raising concerns about a hit to households, businesses and the broader financial sector that could push the economy into a recession.

The proportion of highly indebted households was rising, but even taking into account the higher cost of living - with inflation at 8.9% in May - it was likely to remain below the peak seen in 2007. It said British banks were less exposed than households to the adverse effects of higher interest rates, especially compared with financial institutions in other countries, while the corporate sector remained "broadly resilient".

Britain's eight largest lenders all have enough capital to cope with higher rates, the BoE announced following its annual '"Major UK banks' capital and liquidity positions remain robust and profitability has increased, which enables them both to improve their capital positions and to support their customers."

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