Think tank says rates must rise to 5% to control inflation

Summarised from 2 outlets · Updated 11 Nov, 00:27 · Archive

The National Institute of Economic and Social Research says interest rates must reach 5% to control inflation, which it forecasts will peak at 4.4% in February.

The National Institute of Economic and Social Research (NIESR) has said interest rates need to rise as high as 5% to control inflation while the Government postpones difficult tax and spending decisions. NIESR forecasts Consumer Prices Index inflation in the UK will peak at around 4.4% in February, up from the 3.8% peak predicted in July. The Bank of England raised interest rates to 4% last week, its first rise in more than three years. NIESR expects one more rate rise but argues this will not be enough to meet the 2% inflation target, which it says will not be reached until late 2030. The think tank warns that second-round inflation effects will emerge early next year when companies set wages and prices, necessitating rates of 5% to counter this risk. NIESR also said poorer households will be hardest hit because they must buy less rather than adjust spending or draw on savings. The institute criticised the Government's fiscal policy, arguing that major spending commitments on defence, social care and disability remain unfunded.

Think tank says rates must rise to 5% to control inflation — Image: Evening Standard

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How it is being reported

Interest rates should rise to 5% to control inflation, says think tankThe National Institute of Economic and Social Research said decisions around both monetary and fiscal policy were being ‘deferred’.Evening Standard · 11 Nov, 00:01
Interest rates should rise to 5% to control inflation, says think tankThe National Institute of Economic and Social Research said decisions around both monetary and fiscal policy were being ‘deferred’.Independent Business · 11 Nov, 00:01

In this story: National Institute of Economic and Social Research · Bank of England · UK

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