A senior Bank of England official has warned “significant” increases in interest rates will have to be imposed by the central bank in response to tax cuts put forward by Kwasi Kwarteng in his mini-budget.
The Bank’s chief economist, Huw Pill, said the chancellor’s planned tax cuts would act as a stimulus and increase inflationary pressures, with the result that interest rates would need to go higher than previously forecast.
“In my view, a combination of the fiscal announcements we have seen will act a stimulus to demand in the economy,” he said. “It is hard not to draw the conclusion that this will require a significant monetary policy response.”
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