Investor worries deepened this week as top central bankers reiterated their commitment to raise interest rates to tackle a surge in prices fuelled by Russia’s war in Ukraine. Andrew Bailey, Bank of England Governor, warned that Britain faces a faster and steeper downturn than other rich countries, but still vowed to act “more forcefully” if high inflation - currently forecast to peak at 11 per cent in October - persists.

Jerome Powell, chairman of the Federal Reserve, insisted he would not allow the US economy to slip into a “higher inflation regime”. Policymakers are expected to announce the second consecutive 0.75 percentage point interest rate rise next month.

In a further sign of the strain on families, data released showed UK household incomes fell for a fourth straight quarter at the start of the year.

Adjusted for inflation, disposable incomes dropped 0.2 per cent in the first three months of the year, according to the Office for National Statistics, leaving incomes 1.3 per cent lower than a year earlier, even before the impact of a jump in energy bills and taxes in April.

The ONS figures also confirmed that the economy grew 0.8 per cent in the first quarter. However, the Bank of England expects a contraction in the second quarter as inflation continues to rise and consumers cut spending.

This gloom sent the FTSE 100 down more than 6 per cent in June, the biggest monthly slump since the first wave of coronavirus triggered a market crash in March 2020.

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Market chaos also spread to cryptocurrencies, with Bitcoin racking up its biggest quarterly loss in more than a decade. The 58 per cent plunge in the world’s biggest digital coin is the largest since the third quarter of 2011, when Bitcoin was still in its infancy, according to Bloomberg data.

The notoriously volatile market has suffered a torrid period as interest rates rise and investors flee riskier assets, while a string of high-profile crashes and a looming regulatory crackdown have fuelled fears of a “crypto winter”.

New figures published show that the inflation crisis has also driven confidence among UK bosses to the lowest levels since the start of the pandemic. The Institute of Directors’ economic confidence index dropped to minus 60 in June, the lowest since the early months of COVID.

Telegraph, London

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