City fears energy handout will force sharper rate rises

Raising recession risk: warning that Rishi Sunak's £15bn package to cover fuel bills may force the Bank of England to raise rates more rapidly, which will send up borrowing costs and reduce consumer spending power

- Simon English

THE BANK of England may be forced to shove up interest rates even quicker than it was planning following Rishi Sunak's dramatic intervention in energy markets, the City warned today.

That in turn will increase borrowing costs and reduce consumer spending power, increasing the risk of a recession.

The Bank, widely criticised for moving too slowly to curtail inflation, put rates up to 1% earlier this month from 0.75%. It is expected to enact at least four more quarter point rises this year to 2%.

But the Chancellor's £400 handout to cover energy bills, a £15 billion package, could fuel inflation and force the hand of Bank governor Andrew Bailey and the eight other members of the Monetary Policy Committee that sets rates.