Interest rates rise risks “big economic costs”, says IPPR

The UK’s leading progressive thinktank, IPPR, has responded to the announcement that the Bank of England has increased its interest rates to 4.5 per cent.

Carsten Jung, senior economist at IPPR, said:

“The Bank of England should have held off raising rates. The current approach risks creating big economic costs, in the form of lower future growth and fewer jobs, while not actually being effective enough at bringing down inflation.

“There will be a continued increase in inequality as a result of this: many on low incomes, who are already the ones whose wages are least keeping up with inflation, are the ones hardest hit by lower growth caused by further rate increases. Meanwhile many firms are comfortably keeping up their profit margins.

“Instead, we need a more balanced set policies - including more fiscal policy action - to address the persistence of inflation. This should involve further price support measures to lower energy prices, excess profits taxes to disincentivize excessive price increases, and income support to help smooth out wage adjustments.”