Shock Rates Surge To Fight Bills Crisis

Ministers on ‘war footing’ and mortgage rise ‘inevitable’ after inflation hits 10.1%

- Sam Lister

HOMEOWNERS face another shock interest rate increase to try to halt inflation – in the deepest cost-of-living crisis for 40 years.

Economists predict a second 0.5 per cent rise in a row next month to counter inflation which soared to 10.1 per cent yesterday.

One called it “almost inevitable” but others urged a 0.75 per cent hike, in a bid to stamp out ever-rising costs.

Last night Cabinet Minister Kit Malthouse said that the Government was on full alert to tackle the crisis.

The Chancellor of the Duchy of Lancaster added: “Just to reassure people that over the summer we are putting the Government on a war footing.

“A new Prime Minister in just a couple of week's time now is able to make some quick decisions about where he or she wants to take the country and the economy to get us through in good shape.” The Bank of England recently increased interest rates for the sixth time in a row, from 1.25 per cent to 1.75 per cent. It was the largest rise for 27 years – but is expected to be repeated when the Bank’s Monetary Policy Committee (MPC) meets next month.

Jake Finney, an economist at consultancy PwC, said the inflation rate would “add to existing pressure for the Bank to act more decisively” with a 0.5 per cent hike likely.

Allan Monks, of investment bankers JP Morgan, said the latest inflation figure might spark speculation on whether the Bank would push rates up as high as 2.5 per cent: