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LONDON, Aug 4 Reuters Sterling fell on Thursday after the Bank of England followed its counterparts in the United States and euro zone with a hefty hike in interest rates to quell inflation, saying Britain faces a lengthy recession.

As widely expected, the BoE increased rates by 50 basis points to 1.75, its sixth increase since December but the biggest since 1995.

The UK economy would begin to shrink in the final quarter of 2022 and contract throughout next year, making it the longest recession since after the global financial crisis, the central bank said. 

The main surprise seems to be the somewhat downbeat economic forecasts that we have also been given, which are showing a recession expected in Q4 and lasting through 2023, said Stuart Cole, head macro economist at Equiti Capital.

That is somewhat worse than what we had seen in May, where the outlook was for one or two difficult quarters of low or negative growth, and then a recovery.

Sterling was down 0.2 at 1.2122 after being slightly firmer ahead of the BoE announcement.

British gilt yields fell sharply, with euro zone bond yields extending their fall after the BoE statement.

SP 500 futures were firmer ahead of Wall Street39;s open and the latest jobless claims data, though Friday39;s nonfarm…