As the nation continues to struggle with increased living costs and interest rate hikes, the Bank of England has promised to make life affordable by bringing down inflation. The vow was made earlier this week by the central bank’s Chief Economist, Huw Pill, who hinted there would be further interest rate increases on the cards to control inflation.
In his speech, Pill said that the Bank of England would get inflation back down to its target level of 2%, saying the bank was focused on bringing prices down and improving affordability. This comes as interest rates are at their highest level in 13 years, and inflation is at its highest in four decades.
A faster pace of monetary tightening
According to Pill, economic data will determine whether a faster pace of monetary tightening is necessary, but he said he would consider voting to increase the interest rate by more than 0.25%. The past five interest rate rises have all been for 0.25%, but many industry experts believe the next one could be higher.
He stated that “much remains to be resolved before we vote on our August policy decision. How I vote on that occasion will be determined by the data that we see and my interpretation of it.” He added: “Acting to achieve the 2% inflation target is now more important than ever. In the MPC, we have both the tools we need and the resolve it will take.”
Another central bank official, deputy governor Sir Jon Cunliffe, recently said that high inflation would not become the norm and that the Bank of England would take forceful action to ensure this did not happen.
Inflation could continue to soar
While the central bank has vowed to bring inflation down, there are fears that it could rise as high as 11% before starting to fall. UK inflation is being fuelled by factors such as soaring food, energy, and petrol prices partly stemming from the sanctions on Russia as the war against Ukraine continues to rage.
The bank’s Chief Economist has already warned that people face a challenging time ahead. His recent speech suggests that there could be an interest rate increase of 0.5% coming in August, which many experts had already forecast. This could put further pressure on many homeowners but may be necessary to regain control of rocketing inflation.
Pill said: “Returning inflation to its 2% target is at the heart of the MPC’s actions over the past 10 months.” He added: “We recognise the hardship associated with elevated inflation rates.”