Interest rates rise again as the government’s inflation pledge looks in danger

The Bank of England fears inflation will fall more slowly than it had hoped, writes James Moore

UK inflation is expected to fall slower than previously thought as food prices remain stubbornly high (PA)

With the Bank of England having increased base rates to 4.5 per cent – the 12th consecutive rise – it’s starting to look like a slow-moving political car crash for Rishi Sunak and Jeremy Hunt.

Halving inflation by the end of the year is one of their key economic pledges. At the time the promise was first made, it looked very much like a cynical piece of political gamesmanship. After all, controlling inflation is principally the job of the bank’s Monetary Policy Committee (MPC).

The government can help by aligning fiscal policy with monetary policy. And Sunak has actually been doing that via stealth taxes, such as failing to raise thresholds, which drags more people into higher bands. Credit where it is due, holding the energy price guarantee for an extra three months was also a smart move. Nonetheless, the MPC is in charge of the chief lever: interest rates.