New research suggests that the UK's current interest rates may not be sufficient to tame inflation, challenging the Bank of England's (BOE) stance. The study by Bloomberg Economics indicates that rates are likely near their neutral level, meaning they are neither suppressing nor fueling inflation. This finding comes as BOE officials have maintained that their policy is already restrictive, particularly after the Iran war drove up energy prices.
The research strengthens the argument for another rate hike this week, as the existing measures appear to be falling short of their intended impact. The BOE had previously asserted that its policies were in restrictive territory, but the latest analysis suggests a different picture. The neutral rate level implies that the current monetary stance is not aggressive enough to curb inflation effectively.