The Prime Minister, in a TV interview yesterday, said that the people of the UK must “hold their collective nerve” in the face of continued high inflation. He went on to say that fighting inflation is the priority for the Bank of England, and the Government can do little to influence it other than supplying all the support it can.

Following its surprise fifty basis point hike in short-term interest rates last week, the market now believes that the Central Bank is taking rising prices seriously, having adopted a relatively low-key stance to the situation despite hiking rates consistently since December 2021.

Analysts believe that the peak for interest rates will now be 6%, and this will be reached by the end of the year, by way of two or three further hikes.

Kwasi Kwarteng, the Chancellor under Liz Truss’ disastrous, albeit belief spell as Prime Minister last year, spoke out at the weekend, criticizing his replacement, Jeremy Hunt, for almost welcoming the possibility of the country being plunged into a recession as the Bank continues to hike interest rates.

While a recession is considered the “nuclear option”, to drive inflation down towards the Government’s target, both Hunt and Andrew Bailey have considered the possibility publicly, although neither is likely to welcome a contraction, particularly since the economy is still below the level it was at the start of the Pandemic.

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