Stubbornly high inflation has rocked markets, pushing up borrowing costs and causing chaos for millions of families as banks reprice mortgage deals to reflect predictions of higher rates for longer to tame price rises.Īnother 143 mortgage products were pulled on Wednesday morning. The increase in underlying inflation is a particular concern because it is driven in part by wage growth, suggesting that earnings and prices are chasing each other higher in a dangerous spiral. The higher that rates need to go the greater the probability of a recession”. He said: “The prospect of even more tightening obviously does not bode well for the economy. Sushil Wadhwani, another former Bank rate setter who is also a member of Mr Hunt’s panel of experts, said that “it might take rates at 6pc” to deal with an embedded inflation problem. A Treasury source distanced the department from the remarks, noting she was speaking in a personal capacity. Ms Ward also criticised the Bank, saying it had been “too hesitant” in the past. Karen Ward, an executive at JP Morgan Asset Management and member of Mr Hunt’s economic advisory council, said the Bank of England has to “create a recession” to control inflation. Rishi Sunak rebutted criticism over rising interest rates from Sir Keir Starmer, the Labour leader, by vowing to “take the difficult and responsible decisions” to halve inflation this year.ĭowning Street also waved away calls from Tory MPs to bring back Thatcher-era tax relief on mortgage interest payments, with a spokesman saying it was not being considered. Jeremy Hunt, the Chancellor, said that the government will “stick to its guns no matter what the pressure from left, right or centre”, adding: “We won’t be pushed off course.” The Treasury and Downing Street are resisting calls to spend any extra money to help those facing a jump in mortgage payments, insisting enough support is already in place. Interest rates work by driving up borrowing costs, forcing households to spend more money on repaying their debts and so constraining spending that would otherwise increase inflation.Įconomists now fear that the Bank will have to put rates up so high that it actually pushes the economy into a recession.
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