The Bank of England has hinted that it may raise interest rates in the coming months.
Interest rates may have to escalate in response to increasing levels of inflation. Policymakers at the Bank recently voted to hold interest rates at the record low rate of 0.1%.
The Bank’s Monetary Policy Committee (MPC) stated that it would wait to see how the jobs market copes with the end of the Coronavirus Job Retention Scheme (CJRS) before making decisions on interest rates.
Commenting on the issue, Alpesh Paleja, Lead Economist at the Confederation of British Industry (CBI), said: ‘On balance, the decision to keep interest rates unchanged is the right one. The upcoming rise in inflation will likely prove transitory, and there is as yet only patchy evidence of rising prices becoming embedded in both wage-setting and households’ inflation expectations.
‘The next few months will be something of a balancing act for the MPC. They will need to navigate monetary policy to both curb any signs of price pressures becoming more entrenched, and support the economic recovery from the pandemic.’