Bank of England boss warns further interest rate rises may be needed to stop UK going back to 1970s

THE Governor of the Bank of England has warned further interest rate rises may be needed to stop the UK sliding back to the 1970s.

Andrew Bailey said yesterday “if we do too little with interest rates now, we will only have to do more later on. The experience of the 1970s taught us that important lesson.”

Mr Bailey was speaking a day after industry figures showed that food price inflation had hit a record 17 per cent – meaning cash-strapped households are having to spend now spending an even bigger chunk of their squeezed budgets on groceries.

Increasing interest rates makes borrowing on home loans and credit cards more expensive, but it is meant to bring down inflation by encouraging people to save rather than spend.

Overall inflation has started to ease slightly, which had led some traders to bet the Bank would soon stop hiking rates.

The biggest cause of soaring inflation has been a jump in energy prices since Russia’s invasion of Ukraine, but wholesale prices have fallen sharply since the start of the year.

Mr Bailey yesterday said that “nothing is decided” on the next rate decision, which will be made on 23 March.

“At this stage I would caution against suggesting either that we are done with increasing Bank rate or that we will inevitably do more”, the Governor said in a speech about the cost of living crisis.

The Bank has hiked rates for ten consecutive months, meaning it has jumped from 0.25 per cent to 4 per cent in just over a year.