The good times are gone and there is now a real risk of recession, the Bank of England warned yesterday.
Families face a five-pronged assault on their finances, Governor Mervyn King said in his bleakest assessment yet of the state of the country.
In his quarterly Inflation Report, Mr King said although Britain had enjoyed rising living standards over the past ten years, this golden period was over.
"For the time being at least, the nice decade is behind us," he added.
And the governor predicted:
• Gas, electricity and food bills will get even more expensive this year and will push inflation towards 4 per cent, possibly even higher;
• Economic growth is likely to slump towards 1 per cent by the end of the year, and there is now a risk of recession;
• The housing market will continue to fall after worsening 'markedly', but it is impossible to say how far values will tumble;
• Pay rises may be curbed, further damaging employees' quality of life;
• And the banking crisis could continue to run well into 2009, keeping mortgage costs painfully high.
Mr King's verdict cast a pall over Gordon Brown's political fightback by setting out in grim detail the extent of the difficulties facing the country.
The prospect of soaring inflation and slumping growth will also cast doubt on the Prime Minister's belief that he can pilot the economy to safer waters and avoid a recession.