Andrew Bailey has defended the fifty point rate hike agreed by the MPC last week, while at the same time tried to explain to the market that it is not the Central Bank’s goal to see unemployment rise, although the committee is well aware that firms will need to “rationalize” their workforce as they experience a drop-off in demand.

Headline inflation is still “far too high”, and the Bank believed that it had to make a statement of serious intent when the May price data was released.

Having voted for a twenty-five pointy hike last week, Silvana Tenreyro, speaking at the ECB annual conference in Portugal, shared the belief that she holds with another independent member of the MPC, that pay growth and core inflation are set to slow considerably and rather than further hikes, the Bank of England may be forced to cut rates later in the year to stimulate the economy.

That is, however, not a view held by a majority of the MPC, who acknowledge that their actions will slow the economy, but not to such an extent that it will contract over an extended period.

Interest rates may have now reached a “neutral position” where they are neither supportive nor restricting demand.

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