Rate rise warning
Bank will do ‘whatever necessary’ to tame inflation
MORE and bigger interest rate rises are on the way in the battle against soaring inflation, the Bank of England warned yesterday.
Deputy governor Sir Jon Cunliffe said rate setters at the central Bank would do “whatever is necessary” to stop the surge in the cost of living.
Huw Pill, its top economist, said rates may need to rise more quickly to rein in “uncomfortably high” inflation.
Jump
That points to the possibility that the Bank may lift rates by a half point to 1.75 per cent in August, which would be the largest rise since it gained independence in 1997.
Interest rates have been put up for five months in a row to tackle a jump in inflation, currently 9.1 per cent.
Millions of mortgage payers and potential buyers already hit by soaring energy, food and fuel bills would be hit by more dearer home loans. Research by comparison site GetAgent.co.uk found the proportion of disposable income needed for the average mortgage repayment was at its highest in a decade – 27.6 per cent. Its chief executive, Colby Short, said: “We’ve now seen several interest rate hikes in quick succession. This will understandably come as a worry to the nation’s homebuyers.”
Sir Jon said that the Bank faces a difficult balancing act: “We will do whatever is necessary to ensure that as this period of inflation goes through the economy, it does not leave us with a persistent domestically generated inflation problem.
“We will act to make sure that doesn’t happen.”
Slowing
But the deputy governor continued: “What we expect is that the cost-ofliving squeeze will actually hit people’s spending and that will start to cool the economy.
“We can see signs that the economy is already slowing.”
Fears are mounting among financial experts that a recession – which is defined as two successive quarters of falling economic output – may be looming as the cost crunch hits consumer spending.
The Bank has warned inflation is set to rise past 11 per cent in October.