Omicron poses clear threat to economy but MPC may feel it has no choice but to hike rates

The new variant may increase inflationary pressures while at the same time impeding economic recovery, leaving Threadneedle Street on the horns of a nasty dilemma

James Moore
Chief Business Commentator
Thursday 02 December 2021 00:33
Comments
<p>Masks are back and the economy is starting to feel the heat now omicron has landed </p>

Masks are back and the economy is starting to feel the heat now omicron has landed

A week is a long time in economics as well as in politics, as recent events have clearly proved. Prior to the omicron variant emerging to chuck a lighted match and petrol on to a tray full of already frayed forecasts, projections and expectations, a rate rise this month seemed like a racing certainty.

Interest-rate hikes are rarely cheered by the business community. But the ground had been prepared, and it had more or less accepted the need for one given the head of steam that prices have been building up. Ditto the City, parts of which expected an increase from the current historic low of 0.1 per cent last time round, and got quite miffed when it didn’t arrive (there was a very obvious failure to read the tea leaves in some very highly paid quarters).

Now, the job of the Bank of England’s Monetary Policy Committee (MPC) has been made a lot harder.

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