Interest rates could top 2% next year to tackle soaring inflation, a Bank of England Monetary Policy Committee (MPC) member has warned.
Speaking at the Resolution Foundation think-tank, Michael Saunders (pictured) said it was better to take aggressive action now than do too little, too late.
He said: “The MPC has to balance the risks and costs of tightening ‘too much, too soon’ versus ‘too little, too late’. “In my view, the cost of the second outcome would be relatively high at present.
“Without wishing to endorse those views too strongly, I do not regard such an outcome – ie that the Bank rate will have to rise to 2% or higher during the next year – as implausible or unlikely.”
Saunders, an outgoing member of the Bank’s rate-setting Monetary Policy Committee, voted to increase the interest rate to 1.5%.
However, he was in the minority, and the rate was increased to 1.25%
Figures due out from the Office for National Statistics are expected to show inflation reached 9.2% in June, a new 40-year high.
