Here is a conundrum. At noon on Thursday, the Bank of England will most likely increase interest rates for the sixth time in a row. Analysts are generally expecting a rise of a half of a percentage point– the biggest single hike since before the Bank was made independent, when monetary policy was ultimately the responsibility of a chancellor called Ken Clarke.
Yet this week’s rate rise is not intended to cool an overheating economy – far from it. Both the IMF and the OECD forecast that the UK will endure the weakest growth of any rich country next year, while the well-respected National Institute of Economic and Social Research (Niesr) believes that the country will enter a recession this summer and stay there until well into next year. So why, then, is the Bank pushing up interest rates?
