Bank must put up rates to ‘prop up the pound’

THE Bank of England must hike interest rates more aggressively to prop up the pound and bring inflation back under control, according to one of its officials.

Catherine Mann, who sits on the rate-setting Monetary Policy Committee (MPC), said she feared the weakness in sterling was worsening the cost of living crisis by making imports more expensive.

Speaking at an event organised by financial news organisation MNI Market News, she said ‘more robust’ rate hikes were necessary to help Britons battle red-hot inflation. Her comments came just days after the Bank voted to hike interest rates by 0.25 percentage points to 1.25pc rather than taking the larger leap to 1.5pc.

But that latest meeting of the nine-strong MPC exposed a growing divide between its members.

Mann and two others voted for rates to rise by 0.5 percentage points to 1.5pc – but were outvoted by the other six. The three who voted for the larger increase are so-called ‘external’ members, meaning they are not employees of the Bank.

The split, at a time when many other economists are also calling for more aggressive rate hikes to tame inflation, has renewed criticism that the Bank’s ‘internal’ staff are suffering from group-think.

And while the Bank only raised rates by 0.25 percentage points, the US Federal Reserve last week opted for a 0.75 percentage point hike, strengthening the dollar against the pound.

Former Bank governor Lord King poked fun at the MPC in the Spectator magazine recently, saying it was ‘time to have a word’ with members who as recently as last year were considering cutting rates into negative territory.

‘The Bank will surely act to prevent a continuation of high inflation,’ he added.