The Bank of England’s Haskell says a rate hike is “not out of the question”.

(Alliance News) – A Bank of England policymaker said further interest rate increases “cannot be ruled out” amid decades of high inflation in the UK.

Jonathan Haskell in The Scotsman talks about the “difficult trade-offs” the bank must make to bring inflation back to its 2% target.

The economist, who is an external member of the seven-member Monetary Policy Committee, emphasized that the bank’s task is to ensure that inflation does not take hold in the economy and that prices do not rise.

“Looks better than it did a few months ago,” he wrote.

“Since October last year, inflation has fallen from 11.1% to 8.7%, and we expect inflation to be around 5% by the end of this year. But inflation is still very high.”

Haskell acknowledged that higher interest rates lead to higher costs of borrowing, such as mortgages and corporate loans, at a time when prices for basic necessities are rising rapidly, adding: “We understand this will be difficult for some people and it is an important consideration in our policy decisions.

This comes after the Monetary Policy Committee raised interest rates in the UK to 4.5% last month, the 12th consecutive increase since rates started to rise in December 2021.

HSBC UK temporarily pulled mortgage rates available through brokerage services on Thursday after demand surged as homeowners sought fixed-income deals before interest rates rose further.

Haskell said decision-making on the MPC was made more difficult by the lack of “similar experience from the recent past to draw from”.

Inflation has not reached its recent high levels since the 1970s and 1980s, before the Bank of England became independent and an inflation target was introduced at the Monetary Policy Committee.

This came after his colleague Hu Bell, the policy maker, admitted that the bank’s economic forecasting models led to errors in inflation forecasts, which were too low.

“My view is that it is important that we continue to rely on inflationary momentum risks, and therefore further interest rate increases cannot be ruled out,” Haskell added.

By Anna Wise, PA Business Reporter

Press Association: Finance

Source: PA

Copyright 2023 Alliance News Ltd. All Rights Reserved. All rights reserved.