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Highlights
- The UK economy is headed towards recession according to the forecast presented by the Bank of England on 5 May.
- The inflation level in the UK, which has recently reached a 30-year high of 7% in March, is expected to cross 10% by the end of this year.
- To counter the impact of inflation, BoE’s MPC has raised the interest rate to 1% on Thursday’s meeting.
The UK economy is headed towards a recession according to the forecast presented by the Bank of England (BoE) on 5 May. The households are currently facing a cost-of-living crisis, which has significantly squeezed their budgets. Such a tight living crisis hasn’t been witnessed in the UK since the early 1980s.
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On Thursday, the BoE has warned that the UK economy may shrink over the course of the next year. In 2023, there might potentially be a contraction of 0.25% in the economy, gradually pushing the UK towards recession.
The inflation level in the UK, which has recently reached a 30-year high of 7% in March, is expected to cross 10% by the end of this year. To counter the impact of this unprecedented level of inflation, the BoE’s Monetary Policy Committee (MPC) has been raising the interest rates consecutively in its past four meetings.
The interest rate was increased from the pre-pandemic historic low of 0.1% to 0.25%, 0.50%, 0.75%, and finally to a 13-year high of 1% in yesterday’s meeting. The UK interest rate hasn’t been this elevated since early 2009, when the global financial crisis disrupted the country’s economy.
During the times of recession, investors generally go for blue-chip stocks which have steady cash flows and can provide them with a stable stream of income through dividend payouts.
Here are 3 stocks that UK investors can keep an eye on amid the rising fears of recession.
RELATED READ: FTSE 100 moves higher after BoE’s rate hike announcement
HSBC Holdings Plc (LON: HSBA)
The shares of the leading UK bank, HSBC Holdings plc, were down by 0.61% as the market opened at around 8:00 AM (GMT+1) on 6 May 2022, at GBX 504.80. With a market cap of £102,223.21 million, the FTSE 100 bank has provided its shareholders with a return of 11.14% over the last one year as of 6 May 2022. The bank is currently offering a dividend yield of 4.1% a year.
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Anglo American plc (LON: AAL)
The shares of the UK-based mining firm, Anglo American plc, were down by 1.22% as the market opened at around 8:00 AM (GMT+1) on 6 May 2022, at GBX 3,474.50. With a market cap of £47,096.12 million, the FTSE 100 company has provided its shareholders with a return of 8.12% over the last one year as of 6 May 2022. The company is currently offering a dividend yield of 6.5% a year.
RELATED READ: HSBA, NWG, LLOY: Stocks you may choose as BoE raises interest rates to 1%
Imperial Brands plc (LON: IMB)
The shares of the British tobacco business, Imperial Brands plc, were down by 0.69% as the market opened at around 8:00 AM (GMT+1) on 6 May 2022, at GBX 1,662.00. With a market cap of £15,905.08 million, the FTSE 100 company has provided its shareholders with a return of 7.81% over the last one year as of 6 May 2022. The company is currently offering a dividend yield of 8.3% a year.
Tags: inflation, interest rate, economy
Meta Keywords: inflation, interest rate, BoE, MPC, cost-of-living, blue-chip stocks, FTSE 100, dividend, HSBA, AAL, IMB
Meta description: Increasing the interest rate to 1%, the BoE has warned that the UK economy might be headed towards recession.
