On Wednesday, the Guardian reported that according to a new study by the Peterson Institute for International Economics, (PIIE), based out of Washington, the British economy will likely contract in both 2023 and 2024.

The report found that a shortage of workers, falling real incomes of low-income households, and the persistent inflation behind it will cause a 0.3% reduction in the nation’s gross domestic product (GDP) in 2023, and a further reduction of 0.2% in 2024.

President of PIIE Adam Posen, commenting on the report in an interview with the Guardian, said “The UK won’t be in recession all of next year, but the recovery will be held back by higher-than-expected inflation and in response, the Bank of England will need to keep interest rates higher for longer.”

A former economist who worked on the monetary policy committee for the Bank of England, Posen said that the after-effects of Brexit are still weighing down the UK economy, which will likely also be impacted by cuts to government spending which are being planned for next year.

For the first meeting in almost two years the Bank of England did not hike interest rates last week, following a surprise drop in inflation in August to 6.7%, as growth in food prices weakened and accommodation and air travel costs fell. Still, inflation in the UK remains the highest among all G7 economies.

Posen warned that it is possible there will be more rate hikes over the coming months should inflation not slow further. A co-author of the report, Karen Dynan, mirrored the warnings of the institute, noting these warnings do not apply to Britain alone.

She said, “While inflation appears to be receding in most countries, it remains decidedly above central bank targets. As a result, most central banks will need to keep their policy rates high over the coming year, with the resulting tight financial conditions holding back demand and slowing economic activity.”