What typically happens to interest and inflation rates during a recession and the start of recovery?

During a recession, economic activity slows down significantly, leading to lower demand for goods and services. As a result, interest rates typically decrease because central banks, like the Bank of England, implement monetary policy measures to stimulate the economy. This includes lowering interest rates to encourage borrowing and investment.

Inflation rates also tend to be low during a recession. With lower consumer spending and reduced demand, there is less upward pressure on prices. Businesses may also lower prices to attract customers, further contributing to lower inflation.

As the economy begins to recover from a recession, interest rates often remain low in the initial stages to support continued growth. It is only when the recovery strengthens and demand rises significantly that interest rates might start to increase. However, during the early part of recovery, inflation remains relatively subdued as the economy gradually adjusts.

Thus, it is indeed typical for interest and inflation rates to be low during both a recession and the start of recovery, as these conditions reflect cautious economic activities and efforts to stimulate spending and investment.