The Bank of England’s Monetary Policy Committee (MPC) increased UK interest rates by another half point today, as most had expected, taking them to 4%. But it also hinted that rates may not rise much further, if at all. I think the MPC has got this about right.
The decision to raise interest rates was still controversial. Indeed, two of the nine MPC members (Swati Dhingra and Silvana Tenreyro) voted for ‘no change’ this week.
Many argue that the current high levels of UK inflation (10.5% in December) are largely caused by external factors outside the Bank’s control, notably the fallout from the war in Ukraine on global food and energy prices. Higher interest rates could simply exacerbate the recession.
However, ‘core’ inflation (excluding food and energy) is now over 6%, so it can no longer be dismissed as ‘largely imported’. The shallow recession that the Bank is…
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Utopia, you are standing in it! 
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