Interest rates ‘could hit 2pc’

INTEREST rates could hit 2pc next year, the highest level since 2008, a Bank of England official has claimed.

Michael Saunders, who will step down from the Bank’s rate-setting Monetary Policy Committee (MPC) next month after six years, said such a rise from the current level of 1.25pc was not ‘implausible or unlikely’. The Bank has already raised rates five times since December.

But Saunders said several more hikes were likely to be necessary to slow the rapid rise in the cost of living. At an event held by think-tank the Resolution Foundation, Saunders said that recent Bank surveys of experts suggested inflation would rise to around 2pc in the next year.

He said he did ‘not regard such an outcome as implausible or unlikely’.

The Bank was torn between doing ‘too much, too soon versus too little, too late’ when tackling the cost of living crisis.

But with inflation at a 40-year high of 9.1pc, and set to surge past 11pc later this year, Saunders said he believed it was riskier to do ‘too little, too late’.