Conservatives blame Bank of England for mortgage crisis, millions brace for more rate hikes
- Yesterday’s shocking numbers showed inflation stagnating at 8.7% in May despite rate hikes
Millions of mortgage holders are bracing for a 13th straight rise in rates, with some analysts expecting a 0.5 percentage point rise.
Yesterday’s shocking numbers showed inflation It stagnated at 8.7% in May despite the painful rate hike.
Former Conservative Finance Minister Andrea Leadsom has accused the central bank of being “too little, too late” to curb inflation.and Senior Advisor to the Prime Minister Jeremy Hunt He said he had “misjudged” the threat of inflation.
Rishi Sunak’s pledge to halve inflation this year is now in jeopardy, with government sources admitting yesterday that their ambitions of tax cuts this fall are also in jeopardy. The prime minister today would argue that economic pain will eventually pay off if only it were “on the edge”.
Bank of England Governor Andrew Bailey answers questions after speaking at the British Chamber of Commerce World Annual Conference in London
He listed inflation as the government’s top economic priority, adding: “If we don’t catch inflation now, the damage will be worse and last longer.”
But Karen Ward, a founding member of the Prime Minister’s Economic Advisory Board, said in a highly unusual intervention that the Bank of England was “too hesitant” about inflation. He warned that failing to nip the problem in the bud could mean central banks need to “induce a recession” to keep inflation in check.
She added, “We expected this to be an external factor that would come and go quickly. Clearly not. Our economy is overheating.”
Adam Posen, a former member of the World Bank’s Monetary Policy Committee, said interest rates may need to rise from 4.5% to 6.5% after the bank’s “policy mistakes.”
Former Conservative Commerce Secretary Sir Jacob Leesmogg said the central bank was “inflicting unnecessary pain on the economy because of previous failures”.
Mrs Andrea said the central bank had made a “mistake” in continuing to issue money through the quantitative easing regime even as the coronavirus pandemic was winding down. She added that she “started the rate hike too late and too small.”
The line now looks like this:
- Hunt said he would not bow to pressure from the right-wing Conservative Party until inflation was brought under control, and hinted that tax cuts would need to be postponed.
- Downing Street argued that the Prime Minister’s pledge to halve inflation this year was “on track”.
- Labor has accused the prime minister of imposing a “conservative mortgage fine”.
- National debt topped 100% of GDP for the first time since 1961, threatening another of Sunak’s key promises.
- Rising mortgage rates could cost 1.4 million people 20 percent of their disposable income, according to an analysis by the Institute for Fiscal Affairs.
- Former Prime Minister Philip Hammond has urged the government to ease immigration rules to ease inflationary pressure on the job market.
- Former Conservative Party chairman Sir Jake Berry has called on the prime minister to help homeowners avoid “mass evictions”.
- Experts predicted that if interest rates rose to 6% and remained so for several years, house prices could fall by a quarter.
Inflation remained high in May at 8.7%, the same as the previous month, according to official data. It was expected to drop to around 8.4%. Achieving Sunak’s target would require a reduction to below 5.4% by the end of the year.
In a development that surprised markets, core inflation, which excludes variables such as food and energy, actually rose from 6.8% to 7.1%, partly due to rising wages.
Sunak, who is scheduled to hold a question-and-answer session with voters today, insisted that inflation would be contained. In a statement last night, he said he “feels a deep moral responsibility to ensure that the money we earn retains its value.”
May’s headline CPI fell short of expectations at 8.7%, the same as April’s figures.
“Therefore, our top priority is to halve inflation this year and return to our 2% target.”
“And I am completely confident that we can do it if we have the courage.”
The World Bank has a legal obligation to act to keep inflation at 2%. But critics say they have taken their eyes off the ball as the global economy recovers from the pandemic.
A Treasury spokesman said Ward, chief market strategist at JPMorgan Asset Management, spoke in a personal capacity, and the Treasury remains in line with the pressured Governor Andrew Bailey. claimed.
“The government supports any action the central bank deems necessary to curb inflation,” he said. “Inflation is the ultimate destabilizing factor slowing growth in the UK economy.”
Average interest rates for two-year fixed mortgages rose to 6.15%, while those for five-year fixed mortgages rose to 5.79%, according to financial website Moneyfact.
https://www.dailymail.co.uk/news/article-12220563/Senior-Tories-turn-Bank-England-rates-crisis.html?ns_mchannel=rss&ns_campaign=1490&ito=1490 Conservative officials blame Bank of England for interest rate crisis