High interest rates now risk dampening growth and poorest households need more help, says IPPR

Reacting to today’s interest rate announcement from the Bank of England Carsten Jung, IPPR senior economist, said: 

“The Bank of England’s decision to hold interest rates at 5.25 per cent – the highest for 15 years – means it will take even longer for the UK economy to emerge from its current almost zero growth. 

“It takes 18 months for the impact of high interest rates to feed into the economy, and two thirds of the pain from their current levels is yet to come. We face the risk of overkill – growth may be slowed further and longer than is needed, increasing the likelihood that inflation actually falls below the 2 per cent target. 

“Even though inflation is coming down, that just means prices are increasing less fast – they are still much higher than before this crisis. Households on low incomes are still struggling with the cost of living, with 3.8 million people in destitution - including three times as many children as in 2017. Yet the cost-of-living support package for people on benefits has been withdrawn this year. We need to do more to help families cope with the very high prices they still face.”