IoD press release MPC moves decisively to curb inflationary pressures
Commenting on the 8-1 decision of the Monetary Policy Committee of the Bank of England to increase interest rates to 4%, Anna Leach, Chief Economist at the Institute of Directors, said:
“Today’s was a sobering announcement from the MPC, reflecting a step-change in inflationary risks facing the UK. An expectation that inflation will reach 5% next year cements a unanimous vote for rates to go up, with one member – Catherine L. Mann – voting for a bigger 50 basis point rise. Add to that a slower pace of disinflation, with services inflation and wage growth all holding, and a more resilient economy, and the case for a move now is made. But dissention re-emerges when it comes to the path for rates in the future.
“Uncertainty remains over the resilience of companies and households, the outlook for energy prices and the responsiveness of inflation expectations. The tightrope for the MPC remains one of balancing fragile demand against the energy shock. So the question remains over how high interest rates will need to rise in the months ahead. But the headwinds facing the UK economy will rise regardless, adding further urgency to the Government’s reform agenda.”
