A backlash has begun against the increasing calls for a rise in interest rates.
Silvana Tenreyro, an external member of the Bank of England’s monetary policy committee, said it would be “self-defeating” to raise interest rates in response to a temporary rise in inflation.
Tenreyro said that a short-lived rise in energy prices should not distract from the fact that the economy is performing poorly against the bank’s most recent forecasts. She noted that output was the equivalent of a “full-recession” below its pre-Covid levels.
Catherine Mann, her colleague on the MPC, also downplayed the need for a rate rise.
The committee appears to be divided on whether an early interest rate increase is needed. Michael Saunders, another external member, has hinted that markets were right to price-in an interest rate increase before the end of the year.
