- A former Bank of England official, Michael Saunders, has warned that interest rates may need to rise this year to control inflation.
- This is attributed to spiralling food and fuel costs, exacerbated by the Iran war, which could push inflation to 4.5 per cent from its current 3 per cent.
- Mr Saunders, a former member of the Monetary Policy Committee, suggests it would be less costly to increase rates now than to risk uncontrolled inflation later.
- The warning comes as the Bank's MPC had previously indicated a desire to cut rates before the conflict, and mortgage rates have already increased significantly.
- This outlook is a blow to borrowers hoping for cheaper mortgages, though another economist suggests the Bank might talk tough without necessarily hiking rates unless inflation exceeds 4 per cent.
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