Commenting on the decision of the Monetary Policy Committee of the Bank of England to raise interest rates from 0.75% to 1%, Kitty Ussher, Chief Economist of the Institute of Directors, commented:
“We welcome the Bank of England’s judgement that the need to tackle high expectations of inflation is of greater concern than the risk of curbing demand too fast in the short-term.
“Our own surveys show that only a third of our members currently expect inflation will come back to the Bank’s 2% target before 2024 and much of the current uncertainty business leaders are feeling comes from having to operate in an environment where prices are unstable.
“The Bank, however, has today said it expects inflation to be near the 2% target two years from now, which will be welcome to business leaders.
“The Bank has also signalled that further interest rate rises are on the cards, to around 2.5% this time next year. If, however, cost of living pressures cause households to rein back on discretionary spending, or further difficulties in our export markets cause British companies to suffer lower orders, this assumption may need to be revised.”