Mortgages -
Bank of England economist warns of 'largest-ever' crisis - 27/02/2008
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The UK is facing one of its worst-ever credit crises, the deputy governor of the Bank of England said yesterday.
According to Rachel Lomax, Britain was facing its "largest-ever peacetime liquidity crisis".
Ms Lomax was referring to the continuing effects of the credit crunch, which was triggered last summer by the collapse of the US sub-prime mortgage market.
This led to global financial firms becoming much less willing to lend to each other - which has, in turn, had a knock-on effect on the overall economy.
Many economists are now predicting a recession in Britain, with inflation on the rise and spending slowing down.
In turn, this provides a dilemma for the Bank of England, Ms Lomax also suggested.
Rising inflation generally leads to rate rises - but a slowing economy generally leads to rate cuts.
Therefore, the Bank - which sets the base interest rate each month - might feel conflicted in its future interest rate choices.
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