The Bank of England has raised interest rates today (22 September) by half a percentage point to 2.25 per cent, the highest level since rates were aggressively cut to stabilise financial markets in the autumn of 2008. In doing so it will help to cool inflation, which is now at 9.9 per cent, but it will also add billions to the nation’s mortgage payments and begin in earnest the fight that has long been brewing between a central bank that is required by its mandate to dampen inflation, and a government that is required by its voters to avoid recession.
At the beginning of this year, the New Statesman warned that Britain was more exposed than other countries to the inflation that had rapidly begun to take hold in supply chains, energy and some parts of the labour market – and which would be supercharged, several weeks later, by Russia’s invasion of Ukraine.
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