The Bank of England will hike interest rates at the quickest pace since 1988 this year as it scrambles to douse down rampant inflation.
0Threadneedle Street will lift borrowing costs four more times this year, taking the calendar year total number of hikes to six, according to forecasts by investment banking giant JP Morgan.
The Bank’s shift in policy stands in stark contrast to last year’s agenda when it kept rates at a record low 0.1 per cent for around a year and half despite inflation beginning to take off at the back end of 2021.
It kept rates at record lows to support the UK economy through the economic shock delivered by the Covid-19 crisis and restrictions on Brits’ daily lives.
Rates will settle at 1.75 per cent by the end of this year, the highest level they have been since December 2008.
Inflation in the UK is already running at a 30-year high of 6.2 per cent, stoked by a global energy crunch worsened by Russia’s invasion of Ukraine. Prices have soared on fears oil and gas flows could be restricted by the conflict.
Most economists, including the Office for Budget Responsibility, have warned the rate of price rises will hot up as the year rumbles on, potentially peaking at near nine per cent in October.
Living standards will erode at the steepest pace since 1956, caused by wages failing to keep pace with an average annual inflation rate of 7.4 per cent over the course of the entire year.
Threadneedle Street has been accused by former rate setters of contributing to the historic inflation peak by sitting on its hands during the second half of last year.
Higher interest rates tend to put downward pressure on inflation by curbing spending.
The monetary policy committee has already lifted rates at three meetings in a row, the first time it has done so since 1997.
Rates are now back to pre-pandemic levels of 0.75 per cent.