This morning’s UK inflation data can be described in just two words: truly horrible. With headline inflation stuck at 8.7 per cent and core underlying inflation rising from 6.8 per cent to 7.1 per cent, the Bank of England is facing a huge problem. Most thought the Bank’s key policy rate would rise by a quarter of one per cent tomorrow. Some are now thinking that it will have to move by half of one per cent.
Anyone with a mortgage will be feeling nervous. Interest rates are a remarkably blunt instrument. Yes, they’ll eventually do the job of bringing inflation to heel. Along the way, however, there’s likely to be considerable collateral damage. Homeowners with big mortgages are in the firing line.
