Interest rates could hit 2% next year, warns departing member of Bank of England’s rate-setting committee
Interest rates could hit 2 per cent next year, the highest level since 2008, a Bank of England official has claimed.
Michael Saunders, who will step down from the Bank’s rate-setting Monetary Policy Committee (MPC) next month after six years, said such a rise from the current level of 1.25 per cent was not ‘implausible or unlikely’.
The Bank has already raised rates five times since December.
Inflation fight: Michael Saunders (pictured), who will step down from the Bank’s rate-setting Monetary Policy Committee next month, said Interest rates could hit 2% next year
But Saunders said several more hikes were likely to be necessary to slow the rapid rise in the cost of living.
At an event held by think-tank the Resolution Foundation, Saunders said that recent Bank surveys of experts suggested inflation would rise to around 2 per cent in the next year.
He said he did ‘not regard such an outcome as implausible or unlikely’.
The Bank was torn between doing ‘too much, too soon versus too little, too late’ when tackling the cost of living crisis.
But with inflation at a 40-year high of 9.1 per cent, and set to surge past 11 per cent later this year, Saunders said he believed it was riskier to do ‘too little, too late’.