Faisal Islam: How high will interest rates go?

Interest rates have risen to 4% and the Bank of England has indicated there are more rises to come. The question is how many? There is a split on the rate-setting committee here. Three of the nine voting members referred to "rises" plural. One member voted for a bigger increase, to 4.25%.

Three referred to just one more including governor Andrew Bailey. The Bank's forecasts indicate inflation is heading to just under 5% next spring as a typical household energy bill surges by 27% in January to £2,150 a year. Why have they raised now? High and rising inflation risks a further cycle of self fulfilling expectations of rising prices. It hasn't been seen so far, however.

The war has lasted for 9 months, and led to oil prices used in the forecast averaging $108 a barrel. The other notable factor is that the UK economy is performing much better than forecasts and expectations. This is underlined by the Bank of England's latest forecasts. Growth has been 0.6%, and 0.5% in the first two quarters of the year.