More interest rate rises are on the cards as the Bank of England prepares to jack up the cost of borrowing for the 13th time in a row.
Experts say that the Bank will have to increase its base rate – now at 4.5 per cent – to 5.5 per cent by the end of this year to tame stubbornly high inflation.
The prospect of higher-for-longer rates has already prompted banks and building societies to raise the cost of fixed-rate mortgages or to pull deals altogether – as HSBC did last week.
Pressure: Economics professor Silvana Tenreyro (pictured) will soon complete her second three-year term on Bank’s rate-setting committee
Higher than forecast interest rates also threaten pre-election tax cuts.
The Office for Budget Responsibility, the independent watchdog, believes that the rising cost of servicing the Government’s debt pile will wipe out what limited headroom Chancellor Jeremy Hunt has for giveaways.
The Bank’s rate-setting committee – where economics professor Silvana Tenreyro will soon complete her second three-year term as an external member – will come under more pressure to act when it meets later this month.
Its eurozone counterpart is also tightening the monetary screw.
A quarter point hike this week from European Central Bank, taking its deposit rate to 3.5 percent, ‘seems virtually certain’, said Philip Shaw, economist at Investec bank.
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