An imminent interest rate hike would be the ultimate policy error by the Monetary Policy Committee, which should not raise rates before Q4 if inflation is still high, says Caspar Rock at Architas.
The firm's deputy CIO says CPI would be at around 2.4%, rather than the 4.4% seen in February, if taxes such as VAT and fuel duty had not been raised. "Will putting up interest rates make the government cut taxes? I do not think so. "The whole point of raising interest rates is to try and control growth and inflation. Another way of doing it is to raise taxes, so the core rate of inflation is low and we will be trending down in the second half of the year, back towards the Bank of England's target range of 2%-3%." Rock says he does not think it is right to boost interest rates now,...
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