Interest rates should be held again in August, says rate-setter

The Bank of England is independent of the government and its main role is to keep inflation stable at 2%.

In response to high inflation, the Bank in recent years has raised and then kept interest rates at a high level. The Bank has also forecast that inflation could tick up slightly again in the coming months.

The theory behind rising rates is that it will slow inflation, but it can also drag on economic growth as businesses may put off investment or hiring, which could mean fewer jobs being created.

The main UK interest rate informs the rates High Street banks offer on mortgage deals and savings accounts.

The average two-year fixed mortgage deal on Monday was 5.93%, while a five-year deal was 5.51%, according to financial information company Moneyfacts.

The average easy access savings rate was 3.11%.

Higher borrowing costs have added to financial pressures on household budgets in recent years, which have been stretched by higher energy and food bills.

The UK still has a lower percentage of people of working age in employment than before the Covid pandemic.

Inflation can be impacted by worker shortages, as it can lead to employers having to raise wages in order to attract and retain staff, which can in turn lead to prices for goods rising as businesses increase them to cover costs.

Mr Haskel is an external member of the Bank’s MPC and also a professor of economics at Imperial College Business School.

“The playing out of those shocks through the economy, and the continued tight and impaired labour market, means that inflation will remain above target for quite some time,” Mr Haskel wrote in his speech.

His term on the MPC is due to end on 31 August.