Red Sea crisis threatens Bank of England rate plans

ATTACKS on cargo ships in the Red Sea risk forcing the Bank of England to raise interest rates, a leading policymaker has warned.

Catherine Mann, who has repeatedly voted for further rate rises, said pressure from inflated shipping and insurance costs could reignite the cost of living crisis and force the Bank to act.

“I worry that such an upward inflation shock coming on the heels of the recent high inflation environment will be more swiftly incorporated into firms’ costs and prices, exacerbating upside momentum,” she said.

A further warning was also made about relying on falling energy prices to keep pushing down inflation, particularly as other price pressures remain.

Ms Mann added: “Against a backdrop of sluggish supply growth and possible upside shocks, I see risks of continued inflation momentum and embedded persistence. Inflation is the most pernicious of taxes, affecting all households, and those at lower incomes most severely.”

Her comments came as the boss of shipping giant Maersk warned that the Red Sea crisis could last all year. It has now been two months since Iranbacked Houthi rebels first ramped up drone and missile attacks on commercial vessels off the coast of Yemen.

The disruptions have caused hundreds of ships to reroute around the Cape of Good Hope, adding two weeks to delivery times and nearly tripling freight rates.

Speaking to CNBC, Vincent Clerc, the Maersk chief executive, said: “We have very little visibility as to whether this is a situation that will resolve in a matter of weeks or months, or something that is going to be with us for the full year.”

For 2024, Maersk has forecast its earnings before tax, depreciation and amortisation to range between $1bn (£790m) and $6bn, a major drop compared with the $9.6bn last year.

At the same time, retail sales in the UK fell in January for the fourth consecutive month, say accountants BDO.

Online sales rose 3.2pc last month but in-store purchases fell 4.2pc, with homeware particularly struggling.

Sophie Michael, head of retail and wholesale at BDO, said: “This month was pivotal for recouping losses retailers suffered in the run-up to Christmas.”