IMF calls for bold rate hikes

PRESSURE is mounting on the Bank of England to push ahead with a bold rate rise after central banks were urged to be aggressive in their fight against inflation.

The Bank is set to reveal the latest decision of its rate-setting Monetary Policy Committee (MPC) next week – and economists are expecting a close call on whether it will opt for an unprecedented 0.5 percentage point hike or the more typical 0.25 points.

Officials on Threadneedle Street have lifted rates five times since December – from 0.1pc to 1.25pc.

But none of those rate hikes has gone above 0.25 percentage points – causing some economists to criticise the Bank for acting too slowly in the face of redhot inflation.

While lifting interest rates should help to tame rising prices – by encouraging saving rather than spending – officials are worried it will slam the brakes on the weakening Covid recovery.

But now the Washington-based International Monetary Fund (IMF) has waded into the debate, pushing central banks to hike rates quickly and get the cost-ofliving crisis under control.

In its latest World Economic Outlook, the IMF noted that some central banks were taking a gradual approach to limit the effect on struggling households.

Higher rates will add to the squeeze on families feeling the pinch, as they bump up the cost of mortgages and other loans.

Philip Shaw, chief economist at the investment bank Investec, said: ‘The Bank of England may fear a credibility problem if it is perceived to be lagging behind its peers.’