Bank of England’s rate of interest hikes ‘make no distinction’ to inflation, analyst

The Bank of England’s choice to increase the base interest rate to 5.25 percent can have no impact on inflation whereas making life worse for 1000’s of Britons, a bunch has warned.

Laith Khalaf, head of funding evaluation at AJ Bell, stated: “Its own numbers show that more interest rate hikes will make almost no difference to inflation in the medium term.

“But they will of course inflict more pain on consumers and businesses, and in particular mortgage holders.

“Sometimes doing nothing is the hardest approach, but there is increasing evidence that’s the path the Bank should now be following.”

He pointed to the central bank’s projections that inflation will fall to 1.4 percent if interest rates stay as they are, while hiking rates to six percent and then trimming them to 4.5 percent would get inflation down to just 1.5 percent.

Mr Khalaf explained: “This supports a pause in rate hikes, especially because the cost-of-living crisis engulfing consumers is currently being exacerbated by high interest rates.

“The full effect of monetary policy takes around 18 to 24 months to ripple out into the economy, so a hiatus in rate activity would also give the bank more time to assess the impact of its past actions.”

Another sturdy critic of the central financial institution’s choice was Samuel Mather-Holgate, from Mather & Murray Financial. He commented: “Increasing charges, understanding the final rises have not been felt but, and while inflation is falling, is absolute lunacy.

“Only one member of the Monetary Policy Committee wanted to maintain its previous level and they should be applauded.

“This further rise will add misery to homeowners and those with business finance. An already lifeless housing market will shrink further into itself, not to reappear until Spring.”

The Bank of England has regularly elevated the base rate since December 2021 in efforts to convey down inflation to its goal of two p.c.

Mr Mather-Holgate added: “The Governor must get a grip and reverse these hikes earlier than the tip of the yr.

“Thankfully, the following inflation print may simply give him the impetus to pause and replicate on his insane mission to bash debtors.”

Inflation has been falling in current figures dropping to 7.9 p.c for the yr to June.

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