The UK's leading progressive thinktank, IPPR, has responded to the announcement that the Bank of England will raise interest rates by 0.75 percentage points to 3 per cent.
Carsten Jung, senior economist at IPPR, said:
There is a real risk of inflation staying too high for too long - so it's good that the Bank of England is providing a strong signal that it is moving to tame inflation. But equally there is a real risk that - taken together - the Bank raising rates and the government cutting spending are taking too much steam out of the economy.
This could mean that in a year's time we are in deeper economic peril than we need to be, with the Bank forecasting unemployment to almost double over the next years. The Bank should have moved more cautiously and should only gradually raise rates from now on.
Crucially, the government should not cut spending, but provide support for the economy while also helping businesses and households with high energy prices. With inflation next year expected to average 8 per cent, people will be pushed into destitution and businesses into bankruptcy if the government sits on its hands.