Interest rates will rise tomorrow for the fifth time in a row to 1.25 per cent amid calls for Boris Johnson to level with the public about the cost of living crisis.
The Bank of England is expected to increase rates by 0.25 percentage points from what was already a 13-year high as it seeks to rein in inflation. The Federal Reserve, America’s central bank, went further yesterday, increasing interest rates by 0.75 percentage points, the sharpest rise since 1994.
The prime minister has attempted to strike an optimistic note, saying recently that Britain is in a much better position to deal with inflation than it was in the past.
Lord King of Lothbury, a former governor of the Bank of England, said that the cost of living crisis would be “reminiscent of the 1970s” and suggested the prime minister should make clear that living standards would fall.
“Our leaders need to give us a clear narrative explaining why recent events will inevitably lower our national standard of living, how that burden will be shared, why it is important to bring inflation down, and why measures to raise economic growth and reduce regional disparities will take many years to come to fruition but will work only if we make a start now,” he wrote in The Spectator. He suggested that the Bank should have moved faster to raise interest rates given that inflation had reached a 40-year high of 9 per cent.
King said: “The governor’s eyebrows remain part of the Bank of England’s armoury. Since I left in 2013 mine have been resting. But the latest inflation rate of 9 per cent led them to rise sharply. Time to have a word with those members of the Monetary Policy Committee who only last year were keen on negative interest rates.
“As in the US, inflation is spreading beyond the energy and food sectors to most of the economy. An extremely tight labour market and a surge in industrial disputes are pushing up wages. The Bank will surely act to prevent a continuation of high inflation.”
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