1 August 2008
A member of the Bank of England's monetary policy committee (MPC) has insisted that higher interest rates are "justifiable" given the currently inflationary environment. In an interview with the Daily Telegraph, Timothy Besley acknowledged that borrowing rates are having a dampening effect on the UK economy and are hitting consumers with secured loans and other forms of credit. However, he added that while they are "mildly restrictive", it is important that they remain at their current level or higher to prevent inflation from spiralling. "We've found in the past that once inflation gets significantly out of control, it's extremely difficult to bring it back," he remarked. Inflation is currently running at 3.8%, almost double the 2% target set by central government. Mr Besley was the only member of the MPC to vote for an increase in base rates in July. His views stand in stark contrast to those of colleague David Blanchflower, who voted for a cut in rates to help stimulate the flagging economy. The next decision on interest rates will be made on August 7th, while the inflation report will be published on August 13th
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