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Interest rates hike will have chilling effect on economy, ICAEW warns

Author: ICAEW

Published: 22 Sep 2022

Responding to today’s interest rate decision by the Bank of England’s Monetary Policy Committee (Thursday 22 September 2022), Suren Thiru, Economics Director for ICAEW, said:

“Another significant jump in interest rates is likely to hasten the UK’s fall into recession.

“Raising rates at this speed will inevitably have a chilling effect on the economy by further diminishing consumer and business confidence and increasing the financial squeeze on many borrowers.

“While the growing divergence between monetary and fiscal policy highlights the tough trade-off between soaring inflation and an ailing economy, it also exposes the muddled approach among policymakers in tackling these headwinds, undermining their credibility among consumers, firms and investors.

“Friday’s mini budget must set out a clear and credible tax and spend plan that explains how any fiscal support will be paid for, otherwise international confidence in the UK may fade quickly, weakening our economic prospects further and intensifying the strain on public finances.”