Further interest rate rises “cannot be ruled out” amid decades-high inflation in the UK, a Bank of England policymaker said.
Jonathan Haskel, writing in The Scotsman, spoke of the “difficult judgments” the Bank has to make to bring inflation down to its two per cent target.
The economist, an external member of the seven-person Monetary Policy Committee (MPC), reiterated that the role of the Bank is to ensure inflation does not become embedded in the economy and that prices stop spiralling.
“Things look better than a few months ago”, he wrote.
“Since October last year, inflation has fallen from 11.1% to 8.7%, and we expect it to be around 5% by the end of this year.
“But inflation remains much too high.”
Mr Haskel acknowledged that higher interest rates lead to higher borrowing costs, such as on mortgages and business loans, at a time when the price of essentials is rising rapidly, adding: “We understand that will be difficult for some people and it’s an important consideration in our policy decisions.”
It comes after the MPC hiked the UK interest rate to 4.5 per cent last month, the 12th increase in a row since rates began rising in December 2021.
British bank HSBC UK temporarily withdrew mortgage rates available via broker services on Thursday after facing high levels of demand as homeowners looked to lock down fixed-rate deals before rates rise further.
Mr Haskel said the MPC’s decision-making has been made harder by the fact there is no “similar experience from the recent past to draw on”.
Inflation has not reached the recent high levels since the 1970s and 1980s, before the Bank of England became independent and the MPC’s inflation target was introduced.
It followed fellow policymaker Huw Pill admitting the Bank’s economic forecasting models have led to mistakes over its inflation expectations, which have been too low.
Mr Haskel added: “My own view is that it’s important we continue to lean against the risks of inflation momentum, and therefore that further increases in interest rates cannot be ruled out.”
Press Association – Anna Wise