Britain needs to brace for ‘interest rate rises’

The Bank of England has warned that Britain is “likely’ to see interest rates rise.

The Bank’s Governor Andrew Bailey said that the increase in energy prices and its impact on inflation means that rates may have to rise.

Rates were kept on hold at 3.75% this week.

In the minutes issued alongside today’s decision, the bank said it expects inflation to reach 3.75% in the final three months of this year, compared to its previous forecast of 3.2%.

By early next year, inflation could be well above 4%.

Bank of England Governor

In the minutes, Bailey was quoted, saying: “Financial conditions will continue to work to push down on inflation, and holding Bank Rate is appropriate at this meeting.

“But if the conflict in the Middle East persists for an extended period, as appears to be the case, and the risk of second-round effects emerging increases, it is likely that policy may have to tighten.

If the conflict in the Middle East persists for an extended period, and the risk of second-round effects emerging increases, it is likely that policy may have to tighten.”

It comes as Julian Jessop, an economics fellow at the Institute of Economic Affairs, says the decision to hold the interest rate is a “mistake”.

Speaking to Sky News, he said: “I personally think it was a mistake. I think there is a risk that the perception is the Bank of England is falling behind the curve. It’s sort of kicking the can down the road if you like and not raising rates.”

Jessop said that he thought the Bank of England would have to raise interest rates down the line, so it should be more “forward looking”, which is why he thought it’d be better to “start that job now and restore some credibility”.

Jessop also had bad news for consumers as well, saying he didn’t think there would be any ease to the cost of living, any time soon.