The Bank of England will have to build on the biggest rate rise in nearly 30 years to sweep inflation out of the UK, a senior official at the monetary authority said today.
Dave Ramsden, deputy governor at the Bank, told Reuters “it’s more likely than not that we will have to raise Bank Rate further”.
Ramsden added he will monitor incoming data before deciding whether to vote for another rate rise at the Bank’s next meeting on 15 September.
Threadneedle Street has embarked on a rapid interest rate hike cycle in response to inflation surging to historic highs.
Since last December, it has lifted borrowing costs 165 basis points, including a 50 basis point rise last week, the steepest move in the Bank’s 25 years of independence.
Rates are now 1.75 per cent, the highest in 14 years, but still low by historical standards.
Governor Andrew Bailey and co also released a damning set of forecasts last week – characterised by Wall Street bank Goldman Sachs as the gloomiest ever released by a central bank – that projected the UK will tip into recession in the final months of this year and stay there for five consecutive quarters.
Inflation is set to breach 13 per cent in October, more than six times the Bank’s two per cent target, when another hike to the energy price cap lands
Energy research company Cornwall Insight warned today the cap could top £4,000 in January.
“We know that what we’re doing is adding to an already very challenging environment,” Ramsden said, adding “our assessment is we needed to act forcefully to ensure that inflation doesn’t become embedded”.
Central banks rarely raise interest rates during a recession for fear of heaping even more pressure on businesses and households.
Living costs are already up 9.4 per cent, the quickest acceleration in 40 years.
Ramsden also said the Bank could ditch bonds it hovered up during the Covid-19 crisis while lowering borrowing costs in response to an economic downturn.