Bank of England warned it has gone ‘far enough’ as experts predict hike to 5.5%

The Bank of England is under pressure to stop raising interest rates even as economists forecast they will be increased again next month and may soon be nudging 6 per cent.

A panel of experts has called for the Bank’s main interest rate to go up to 5.5 per cent or even 5.75 per cent, from its current level of 5.25 per cent, when the monetary policy committee meets in a few weeks’ time.

Rate-setters have indicated they believe they need to keep raising borrowing costs, to remove spending power from the economy and encourage people to save instead.

But some economists and politicians fear there is a risk the UK will be tipped into recession if the Bank moves too aggressively, pointing to early signs that unemployment is rising and consumer confidence faltering.

George Dibb of the centre-left Institute for Public Policy Research think-tank said: “The Bank has gone far enough with rate rises – in fact, we have probably gone past that point already. The Bank itself acknowledges that interest rate rises take a year and a half, two years to filter through to the economy so we are only now beginning to see the effect of those rises. Now is the time to take stock of those rate rises and see where we are in a year or so.”

He added: “Further rate rises will further harm investment – the UK is at the bottom of the international league tables on investment. There are early warning signs that we might be killing the prospect of a soft landing.”

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That view is echoed by some free-market supporters, including Conservative MPs, who want to see other interventions such as liberalising regulations rather than a repeating cycle of interest rate rises.

Last week the Office for National Statistics said consumer price inflation had dropped by more than a percentage point, meaning average salaries are finally growing again in real terms. But most economists remain worried about a possible “wage-price spiral” which could render inflation more persistent.

A spokesman for No 10 said: “The Government is ensuring it is doing everything in its power to tackle inflation, obviously the energy price cap was a big part of that as is being fiscally responsible. We are seeing currently the rate of inflation is falling – that is to be welcomed, obviously we have a lot of work to do. We are confident that we are on the right path.”

Rishi Sunak has promised to halve inflation over the course of this year, which would mean bringing it down to just above 5 per cent from its current level of 6.8 per cent, but also says he will grow the economy at the same time.