Inflation fears set to prompt interest rate hike

THE Bank of England is widely expected to raise interest rates again this week and more hikes are firmly on the cards as policymakers battle to cool soaring inflation.

Members of the nine-strong Monetary Policy Committee (MPC) are set to increase rates on Thursday from 0.25 per cent to 0.5 per cent as the Bank’s quarterly set of forecasts are likely to show eye-watering inflation this spring.

It would mark the Bank’s first back-to-back increase since June 2004, coming after it lifted rates from 0.1 per cent to 0.25 per cent in December to try to rein in rampant inflation. Financial markets are now pricing in four rises in 2022, which would see rates reach 1.25 per cent by the year end – the highest level since 2009.

Consumer Prices Index (CPI) inflation already hit a near 30year high of 5.4 per cent in December and painful energy price rises are expected to push it beyond six per cent this spring.

Martin Beck, chief economic adviser to the EY Item Club, said: “While the case for the MPC raising interest rates in February’s meeting is far from unambiguous, the EY Item Club expects the committee to take that step and increase the Bank rate to 0.5 per cent.

“Granted, the Omicron variant has almost certainly left the economy weakened as a result of greater consumer hesitancy and a rise in the number of people isolating. But that the MPC raised the Bank rate in December regardless indicates that the committee placed less weight on the virus. And recent developments are likely to reinforce this stance.”

Young back at work – but face insecurity

ENMPLOYMENT

YOUNG PEOPLE have returned to work rapidly, thanks to the furlough scheme keeping youth unemployment in check, but many have gone back to insecure jobs, new research suggests.

By October 2021, three out of four young people who were in work before the pandemic, but jobless during the winter lockdown, had returned to work, the Resolution Foundation said.

However, its study also found that 50,000 young men have dropped out of employment altogether over the past year and are now classed as economically inactive.

The left-leaning think-tank reported that problems persist even though unemployment is now lower than pre-pandemic levels. One in three 18 to 34-yearolds have returned to atypical, often insecure work, according to the foundation, which surveyed 6,100 adults.