In response to Andrew Sentance’s decision to vote for a 0.5% rate rise in the February Monetary Policy Committee meeting, I agree rates need to rise over time and I’m sure he has a lot of data to back up his case.
But one thing he doesn’t have is contact with real people who are having to cope with their incomes being squeezed more than ever due to rising oil costs and VAT rises.
Once these feed through, it multiplies the inflation figures. The inflation figure is not because of rampant consumerism, it is caused by speculators and currency issues in the oil market and by VAT rises.
If rates rise too far too soon it will cause more repossessions, which will cause property prices to fall, creating further problems for vulnerable people.