A Whitehall source told The Telegraph: “The Chancellor will hold the banks’ feet to the fire on the commitments they made in December.”
However, industry executives questioned the rationale of the meeting, adding that banks have yet to see any material increase in customers falling into arrears.
A senior executive at one London-listed lender said: “What is the point? The Chancellor has already said they’re not providing any bailout fund and the banks are not asking for one either. It’s nothing more than a photo opportunity.
“The politics of it is that Jeremy Hunt needs to be seen to be doing something because if he doesn’t he’ll be criticised by the Labour Party.
“Talk of intervention is premature – it’s also dangerous. If every time there’s a problem and the government comes to the rescue, it’s easy for opposition parties to call for that, but it creates moral hazard.”
Tory criticism of the Bank’s handling of inflation is also mounting. Jacob Rees-Mogg, the former business secretary, said it had been “slow off the mark” and had “failed in its primary task”.
Norman Lamont, the former Tory chancellor, said interest rate rises were needed but added: “The Bank of England has made some mistakes along the way. They should have put rates up earlier.”
Sir John Redwood, a former cabinet minister and the head of the No 10 policy unit under Margaret Thatcher, said: “A lot of the inflation is down to bad Bank of England mistakes in 2021 and going into 2022.”
Mr Posen said rates will need to stay at 6.5pc for “up to six months” in order to bring inflation back down. “There will be damage, but it is necessary,” he said.
Charles Goodhart, a founder member of the MPC, described the Bank’s inflation challenge as a “nasty dilemma”.
He said Governor Andrew Bailey could “either raise Bank Rate by half a per cent and get attacked for mortgages and driving UK into recession, or raise by a quarter of a per cent and lose credibility as an inflation resistor, and appear to allow a wage-price spiral to strengthen.”
Other former policymakers warned that rates may have to remain above 5pc for some time to get price rises under control.
Michael Saunders, who left the MPC last year and believes rates will peak at “between 5pc and 6pc”, said: “I doubt that interest rates will come down until inflation is back to (or about to reach) the 2pc target – this is more likely to be 2025 than 2024.
