Interest rates latest: Pressure mounts on Bank of England as inflation soars | City & Business | Finance

Inflation rose once again in January as it moves closer to the Bank of England’s prediction of a peak of 7.25 percent in spring. The Consumer Prices Index reached 5.5 percent in January, up from 5.4 percent in December, according to the Office for National Statistics (ONS). With inflation now approaching three times the Bank of England’s target level of two percent pressure is growing on the Bank to control spiralling prices. The Bank has already carried out two consecutive rate hikes, the first time it has done this since 2004.

Despite these moves it has still attracted criticism for being slow to act.

John Leiper, Chief Investment Officer at Titan Asset Management, commented: “Whilst the Bank of England was one of the first major central banks to start raising rates in the face of higher and persistent inflation, it too remains behind the curve.

“Today’s print for January inflation will do little to sway that narrative or deter the BoE from an additional 25bp hike at its March meeting, which would be the first time the bank has raised rates in three consecutive meetings since 1997.”

Thomas Pugh, an economist at consultancy RSM UK, predicted there would “probably then be another hike in May” however he suggested the Bank would “pause” there.

However the fact four supported an increase of 0.5 percent has indicated the harder direction the Bank is heading in.

Hinesh Patel, portfolio manager at Quilter Investors, cautioned: ” A 50 basis point hike may well be on the cards, but it would be a sharp correction for the Bank which may ultimately not allow them to hike more in future, especially once we see households and businesses under even more strain this year.”

The Bank has also been at the mercy of global factors such as the explosion in gas and oil prices which its own monetary policy can do little to control.

While it has been hoped energy prices will begin to dip moving into the spring the uncertain situation over Ukraine has put further doubts on this.

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With interest rates typically showing a delay before kicking in and controlling inflation the Bank is also thought to be fearful of leaving consumers and businesses with both high living costs and high interest rates in the meantime.

Suren Thiru, Head of Economics at the British Chambers of Commerce, warned: “Tightening monetary policy too quickly risks undermining confidence and the wider recovery and will do little to curb the global factors behind the current inflationary surge.”

For consumers, mortgage costs have already increased considerably with market research suggesting many of the cheap deals seen last year have all but disappeared.

While savers may look to rising interest rates for relief banks have typically been slow to pass on any increases in full, with recent reports finding savers getting as little as 10p a month on average.