Interest rates warning as UK inflation to hit 17.7%, think tank says
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Interest rates warning as UK inflation to hit 17.7%, think tank says

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Interest rates could be set to soar even higher than previously believed as retail price inflation bites, a think tank has warned.

The Bank of England is set to raise interest rates higher and for longer than initially forecast, as one measure of inflation soars to 17.7%, an influential British think tank has warned. 

The Retail Prices Index (RPI) is set to soar higher than the official Consumer Price Index (CPI) which is set to hit 11% by the end of 2022. 

The RPI, introduced in 1947, is no longer an official measure, but is still used in wage negotiations in Britain.

Companies feel the chill

In recent weeks, British companies pared back profits and earnings forecasts as consumers tightened their belts, with delivery unicorn Deliveroo (GB:ROO) cutting its revenue guidance. 

As consumers shun big-ticket purchases, furniture retailer Made.com (GB:MADE) also slashed its earnings and sales forecasts for the coming months. 

Interest rates set to soar

The National Institute of Economic and Social Research warned that the Bank of England would need to raise interest rates to 3% to bring down inflation. 

Analysts have suggested that the Bank’s Monetary Policy Committee could raise interest rates by 0.5% on Thursday, bringing the base rate to 1.75%.

The think tank said, “The Bank of England’s Monetary Policy Committee must continue to be cautious as it walks a fine line between tightening policy too quickly, worsening the recession, and too slowly, increasing the risk of high inflation becoming embedded in expectations.”


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