Interest rates latest news: Bank chief under fire for bungle as rates set to rise for 13th time

Bank of England chief Andrew Bailey is under fire from chancellor Jeremy Hunt’s economic advisers for failing to curb inflation, as interest rates are poised to rise for the 13th time in a row.

Today the Bank’s Monetary Policy Committee (MPC) is set to push interest rates up to their highest level for 15 years, piling further pressure on struggling mortgage holders.

Top economists accused Mr Bailey – who claimed there would be a sharp fall in inflation three months ago – of worsening the mortgage crisis by previously being too slow to act on persistent price rises.

Karen Ward, a member of Mr Hunt’s economic advisory council, said the Bank would now have to trigger a recession to finally tame the inflation problem. “There’s no other way around it.”

Despite the Bank of England holding the biggest lever to control inflation, Rishi Sunak has said his government is making moves to get people into work and boost energy production which will also help.

“I know things are difficult, but if we can hold our nerve I’m confident this plan will deliver,” he tweeted – teasing his speech this afternoon after the Bank of England decision.

Sunak added: “We’re working every day to halve [inflation] by removing barriers to work and safeguarding our national energy security. Getting more people into work and producing more energy at home will help get inflation down.”

The Consumer Prices Index (CPI) rose by 8.7 per cent in the 12 months to May 2023, unchanged from April but down from a recent peak of 11.1 per cent in October 2022.

Floundering foreign secretary James Cleverly was left red faced in a bruising BBC interview when he was put on the spot over the inflation crisis.

Challenged six times to say how Rishi Sunak planned to cut price rises, Mr Cleverly stumbled in his replies – and was at one poiint greeted with laughter by BBC Radio 4 interviewer Amol Rajan.

Eventually Mr Rajan ended the interview abruptly, silencing Mr Cleverly and saying: “We’re going to the weather.”

At one a point tongue-tied Mr Cleverly mistakenly talked about “low-skilled inflation” harming the economy, when he meant to say “low-skilled immigration”.

The graph shows how much the rise of the UK inflation rate for food from 1989 to May 2023.

Food and non-alcoholic beverage prices rose by 18.4% in the year to May 2023, down from 19.1% in April and from 19.2% in March, which was the highest annual rate seen for over 45 years.

Have you been affected by rising interest rates? Are you seeing your mortgage payments soar? Get in touch by emailing [email protected]

Former Chancellor Lord Philip Hammond has told Andrew Marr that the government should consider relaxing immigration rules to avoid sending the country into recession: “I don’t think The Bank [of England] has got much choice [but to tip the country into recession] unless the government does something pretty significant intervening in the labour market in a different way.”

He added: “I think the government has regarded any relaxation of migration rules as being politically toxic. But rising mortgage rates on the scale we’re seeing is also politically toxic. I think we might have to have a debate about the balance between the two of you…”

When questioned about her plans to help people with their mortgages, Rachel Reeves, shadow chancellor said it was about helping those who are worried about coming forward for financial help.

She told BBC Radio 4: “It’s not urging, it’s an instruction. An instruction that was made during the Covid pandemic via the regulator to say to banks they have to offer these products to people who are in financial difficulties.

“So, interest-only mortgages, extending the term of the mortgages, halting repossession orders for six months and crucially saying to customers, if you seek support, your credit rating is not affected because there are many people who are really worried at the moment about coming forward and identifying themselves as someone who is struggling with their mortgage because they worry that will have knock-on effects on their credit ratings.

“I’m really concerned about these people who have saved up a deposit, have been making their monthly mortgage payments, who go out to work every day, are being clobbered by energy bills, food prices and now, on top of all of that, on average when you’re remortgaging you’re looking at nearly £3,000 extra a year and I want to support those people to get through this difficult period.”

Foreign secretary James Cleverly struggled to explain what Rishi Sunak and the government were doing to tackle inflation in an interview on BBC Radio 4.

Asked repeatedly for specific actions the government was taking, he told the Today programme: “One of the main vehicles for short-term addressing inflation is interest rates.”

Mr Cleverly was pushed on what the PM was doing, given interest rates are in the hands of the independent Bank of England.

“Not all the levers of control are in the government’s hands,” he said.The cabinet minister mentioned changes to training and apprenticeships as a way the government was trying to boost the economy.

Pushed again on short-term measures, he said: “One of the reasons why we have been thoughtful but cautious on public-sector pay awards is we know that is one of those things that adds inflationary pressures.

“We’re very conscious that increased government borrowing is one of those things that loops around and increases inflationary pressures.”

The Bank of England has no choice but to trigger a recession as a way of taming inflation, top economists have warned – including one of chancellor Jeremy Hunt’s own advisers.

The central bank is set to interest rates for the 13th time in a row today after shock inflation figures showed previous hikes failed to cut persistent price rises.

Some of Mr Hunt’s advisers have attacked the Bank for being too cautious in raising the base rate – saying it was time to accept the inevitability of a recession.