MPC member Jonathan Haskel says embedded inflation would be worse than higher borrowing costs, so further rate rises may be needed
Economists at KPMG are also warning that UK interest rates will continue to rise this year, due to stubborn inflation.
Their latest economic forecasts, released this morning, show a brighter growth picture -but high inflation for longer than hoped.
Given the latest surveys, we no longer expect a recession in the UK, but growth is forecast to remain sluggish by historical standards.
Inflation is on the way down, but the pace of moderation is slower than we previously thought. This will likely necessitate further interest rate increases and more pain to come for borrowers.
The upside revision to our forecast means no plain sailing. Risks remain skewed to the downside, with ongoing fragilities potentially yet to be fully uncovered.
“We’ve seen a slightly stronger momentum for the UK economy but risks are still elevated on the downside. A stickier inflation will see monetary policy tightening even further, increasing the risk of unwelcome side effects among other potential headwinds.”
