With the Bank of England set to agree to the biggest hike in short-term interest rates in more than thirty years later today, analysts are beginning to consider how much further the Central Bank is willing to go in its fight against inflation.

With consumer prices hitting 10.1% in September, the tactic of hiking by bigger increments is still open to question. The widespread belief is that once rates reach neutral and move into restrictive territory, their effect on demand will become exponentially greater.

However, that idea is not universally accepted as the cause of the rise in inflation is not driven purely by supply and demand or any particular asset bubble.

The amount of money in the system following the relief provided to households during the Pandemic is one factor that rate hikes won’t affect, as is the rise in energy prices.

While it is the demand for gas that is driving inflation higher, that level of demand has been limited by the rise in prices that is driven by outside influences.