The risk of a hard landing for the economy has been heightened by the recent actions of the MPC in hiking interest rates by fifty basis points. Economists at the OECD believe that the base rate of interest could now reach 7% as the Bank of England appears determined to stamp down hard on the rate of inflation, which has remained stubbornly high.

It is expected that the base rate will rise to 6% by the end of the year, and depending upon the path of inflation in the New Year, they are able to envisage a scenario where rates now touch 7%.

The rise in interest rates throughout the first and second quarters has not had the effect of dampening demand as they come closer to restrictive territory.

The “neutral rate” has become something of a “moveable feast” with no one at the Bank prepared to commit. With the highest headline rate of inflation in the G7, the possibility of a further fifty basis points being added and either the next MPC meeting or the one following the likelihood of there being a hard landing where the economy falls into a recession has increased.

Neither Jeremy Hunt nor Andrew Bailey appears to be particularly perturbed by the prospect of a mild recession, although both have been at pains to say that it is not their goal to see the economy contract as a method of containing rising prices.

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