Bank committee members consider interest rate hike as inflation soars
The central bank has come under mounting pressure to cool rising prices.
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Your support makes all the difference.The Bank of England is set to reveal whether it will hike interest rates or shrug off calls for an increase for at least one more month.
The central bank has come under mounting pressure to cool rising prices amid continued inflationary pressure and some analysts have therefore suggested it could finally be time for a rate rise at its meeting on November 4.
Consumer Price Inflation slowed marginally last month, but its 3.1% reading was still the second highest figure the Office of National Statistics has recorded since 2012.
Speculation regarding a potential rate rise has gained further steam after the Office for Budget Responsibility (OBR) revealed its latest outlook documents on Wednesday.
The OBR warned that inflation is likely to average at around 4% in 2022 and potentially post a peak close to 5%, suggesting the possibility that inflation could reach its highest for 30 years.
Following the outlook presentation, Chancellor Rishi Sunak stressed the potential impact of a rate rise, flagging that even a one percentage point increase in interest rates would cost the country £23 billion in payments on its debt mountain.
At the Bank of England’s previous Monetary Policy Committee meeting in late September, there was increasing appetite among members for pulling some fiscal levers.
Two policymakers, deputy governor Dave Ramsden and external MPC member Michael Saunders called for a £35 billion cut to the Bank’s £895 billion quantitative easing (QE) programme amid the inflation fears, though they were outvoted 7-2.
However, all nine members ultimately voted to keep rates on hold at 0.1%.
Analysts had broadly predicted that an interest rate rise would come in December but the latest OBR forecasts could speed up central bank action.
Experts at Investec have said they believe the MPC will vote in favour of increasing interest rates by 0.15 percentage points to 0.25% on Thursday.
“In the collective mind of the MPC, we judge that concerns over inflation will outweigh the downside risks from a potential upturn in unemployment following the end of the furlough schemes,” Investec said.
It comes after a variety of statements from MPC members which have sounded increasingly anxious about the inflationary backdrop.
Michael Saunders said earlier this month that households should brace for “significantly earlier” rate rises than previously expected.
Invested added that the bank’s rate-setters will “almost certainly” vote in favour of ceasing current quantitative easing operations if rates are lifted.