The word recession is one that strikes fear into the hearts of many, particularly those that remember the dark days of the late 1980s and early 1990s. However, over recent months the nation has seen financial markets dry up, house prices plunge, credit conditions become increasingly tight, inflation levels soar, and consumer confidence dwindle. It is therefore little wonder that so many people are convinced that the country is on the brink of recession. With households facing their toughest time in years when it comes to finances many people are unable to spend freely, which is affecting the economy.

However, whilst the Bank of England has cut interest rates three times since December to try and boost the economy it seems that these interest rate cuts are not set to continue over the rest of the course of this year.

The governor of the Bank of England, Mervyn King, recently indicated that the central bank would have to take action in order to try and bring rising inflation levels back under control, and to many this means that there will be no further rate cuts this year. Just a few months ago industry officials were predicting that there would be a number of further rate cuts this year, which could see the base rate fall to around 4% by the end of the year, but with inflation having soared to 3.3%, which is way above the government target of 2%, this is highly unlikely now.

Further gloomy news came when King said that whilst inflation levels were likely to continue rising wages would increase below the rate of inflation. With consumers struggling to cope with sky high petrol costs, soaring food prices, rocketing energy usage costs, and more it is little wonder that consumer confidence levels have fallen so much. Yet officials such as Mervyn King and the chancellor, Alistair Darling, still claim that the nation is not, in fact, on the brink of recession.

However, just a few months ago the Queen herself cancelled a lavish party that was due to be thrown for her diamond wedding anniversary, and friends of the royals revealed that this was because she thought it would be in bad taste to throw such a party when the nation was teetering on the brink of recession.

A number of industry officials have said that the Bank of England needs to take more action in terms of aggressive cuts to interest rates in order to try and stave off recession and boost the economy, and this includes officials from the British Chambers of Commerce, who believe that the government is focussing too much on inflation levels and putting the state of the economy on the back burner. However, the central bank has had some support in its decision to leave interest rates on hold for the past couple of months, with officials from the British Retail Consortium stating: “Struggling customers and retailers certainly need a boost but, with rising oil and commodity prices stoking inflation to well above the 2% target, leaving rates unchanged was the wise option.”

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