Bank of England Governor Andrew Bailey has warned it may be “appropriate” to raise interest rates further to bring inflation back under control.
Although inflation has started to fall — down to 10.1 per cent in January from a peak of 11.1 per cent in October — it is still near 40-year highs and way off the Bank’s two per cent target.
To try to tame soaring prices, which have led to the biggest hit on living standards for decades, the Bank’s Monetary Policy Committee has raised the base rate to four per cent — its highest level for 15 years, adding to the misery for millions of people with mortgages.
Speaking at a cost-of-living crisis conference hosted by PR firm Brunswick on Wednesday morning, Mr Bailey refused to commit on whether more hikes would be needed, starting later this month.
But he conceded: “Some further increase in bank rate may turn out to be appropriate, but nothing is decided. The incoming data will add to the overall picture of the economy and the outlook for inflation, and that will inform our policy decisions.”
Fresh market research by analysts Kantar showed grocery price inflation rose again to reach 17.1 per cent in the four weeks to February 19, the highest level ever recorded by the firm.
But energy bills are expected to fall in the second half of the year, even though the Government’s energy price cap is still set to rise from £2,500 to £3,000 a year for a typical household from April.
Chancellor Jeremy Hunt is coming under pressure to scrap the planned rise to relieve the pressure on squeezed families, especially after energy watchdog Ofgem announced its own price cap for April will fall by around £1,000 to £3,280.
Mr Bailey predicted wholesale energy prices were set to fall further this year, leading to a drop in household energy bills and easing broader inflationary pressures. He added: “Energy bills will start to drag directly on overall annual consumer price inflation.
“But, as you can see, this does not mean that we should expect household energy bills to come down to previous levels any time soon. And from a cost-of living perspective, it is the level of what people have to pay that matters.
“There will be some relief, but energy bills will remain a challenge for many people, particularly for those on lower incomes.”
