The Bank’s chief economist, Huw Pill, said the chancellor’s planned tax cuts would act as a stimulus and increase inflationary pressures, with the result that interest rates would need to go higher than previously forecast.
“In my view, a combination of the fiscal announcements we have seen will act a stimulus to demand in the economy,” he said. “It is hard not to draw the conclusion that this will require a significant monetary policy response.”
Pill’s remarks are likely to further spook homebuyers and mortgage borrowers near the end of a fixed-rate mortgage about the cost of financing their loans.
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