Could the BoE hike rates to 5% today? Brits brace for more pain at noon with fears of a half-point rise after inflation shock - as lenders are urged to let stricken mortgage-payers switch to interest-only or extend terms

 Could the BoE hike rates to 5% today? Brits brace for more pain at noon with fears of a half-point rise after inflation shock - as lenders are urged to let stricken mortgage-payers switch to interest-only or extend terms

The British are threatened with another hammer blow today: The Bank of England will raise interest rates for the 13th time in a row in order to stem the rapid inflation.

Markets are pricing in a 0.25 percentage point rise to 4.75% when the Monetary Policy Committee's latest decision is announced at midday.

But yesterday's shocking numbers, which showed prices still not slowing, made a 5% rise a real possibility - adding to the agony of mortgage payers.

The respected think tank IFS prevented 1.4 million people from losing a fifth of their disposable income due to rising costs.

BoE Governor Andrew Bailey has come under fire for not acting earlier on inflation. Some financial advisors argue that Threadneedle Street now has no choice but to force a regression.

Rishi Sunak has resisted Conservatives' calls for tax breaks or other government relief for homeowners and renewed his pledge to raise CPI inflation by the end of the year.

Labor lists say banks should be forced to allow vulnerable mortgageholders to switch to interest-only payments or extend their maturities - even if it means increasing their long-term debt.

Speculation is swirling that the Monetary Policy Committee might even opt for a 0.5 percentage point rise today from the current 4.5 per cent 

The panic was sparked when official figures showed that headline inflation remained stuck at 8.7%, beating expectations of a fall to 8.4% and suggesting that price increases are anchored in the economy.

In order to achieve Mr. Sunak's target, it must be reduced to a maximum of 5.4% by the end of the year.

Markets were particularly concerned that core inflation, which excludes volatile factors such as food and energy, actually rose from 6.8% to 7.1%, partly thanks to rising wages.

The average two-year mortgage has hit 6.15 per cent, while government borrowing has also become massively more expensive

Traders raised borrowing costs as they expect the BoE to use its only tool to fight inflation and raise interest rates.

The average two-year mortgage has hit 6.15% while government borrowing has also become massively more expensive, raising questions about public services and the Tories hoping for tax cuts this fall.

Sunak, who will hold a question-and-answer session with voters today, insisted inflation should be brought under control

In a statement last night, he said: 'I feel a deep moral responsibility to ensure that the money you earn maintains its value.

"That's why our top priority is to halve inflation this year and return to the 2% target."

"And I'm absolutely convinced that we can do it if we keep our composure."

The bank is required by law to target an inflation rate of 2%. But critics say the company lost track as the global economy recovered from the pandemic.

Karen Ward, a founding member of the Chancellor's Economic Advisory Council, said yesterday that Threadneedle Street had been "too tentative" about inflation.

She warned not to nip the problem in the bud, which could mean the bank will have to "manufacture a recession" to get inflation under control.

She added: "The hope was that these were external factors that came and went quickly. Clearly that's not the case - our economy is too hot."

In a series of interviews this morning, Secretary of State James Cleverly said Mr Sunak remains committed to halving inflation this year - but triggering a recession is not the solution.

"What we have to do is let the economy grow," he told Sky News

"High interest rates don't help. I don't think anyone in government would subscribe to the idea that we should deliberately go into recession."

He added: "We know that the Bank of England is independent in its interest rate decisions. Obviously he has an inflation target to pursue.

“Of course we are seeing inflation mostly due to the upward pressure on food and fuel prices compounded by this war in Ukraine.