A rapid interest rate rise seems inevitable – and households are expected to pick up the tab

The Bank of England is expected to raise interest rates again, possibly at its 17 December meeting, as it anticipates inflation reaching 5% next spring. The article argues that higher borrowing costs could dampen already weak economic growth, while households and public services may bear much of the cost of efforts to contain inflation.

A rise from 4% to 4.25% would make mortgages and business loans more expensive, and the Bank expects companies to pass higher costs on to customers. The article questions how much room consumers have to absorb price rises, noting that only higher-income households have increased spending this year, partly by using savings. It argues that government bodies are a major purchaser, accounting for 25% of overall consumption, and cites infrastructure cost overruns and public-sector consultancy spending as signs that public budgets may also face pressure.