The Bank of England is walking a narrow path, as it tries to limit inflation without causing an even deeper recession, says Josie Dent, Managing Economist at the CEBR think tank.
In particular, by raising rates, the Bank is increasing costs for the millions of households that will face higher mortgage costs from next year onwards. This will mean many of these households will have to cut back spending in other areas, leading to weaker economic activity.
However, concern was also expressed today that a tight labour market could lead to more persistent inflation, justifying further interest rate rises.”