Having failed to move on interest rates for most of last year when prices for food and fuel started rising, the Bank of England (BoE) is now chasing its tail to stymie an inflationary surge of a magnitude unseen in the UK for more than five decades.

Members of the Bank’s Monetary Policy Committee (MPC) – those nine who vote on whether to raise, cut, or keep interest rates on hold – are caught between a rock and a hard place. They have made clear they will act “forcefully” to curb inflation, but this risks feeding an economic contraction that is expected to be the longest recession since the global financial crisis of 2008.

Higher interest rates are good for savers, but not all savings accounts fully reflect the increase in base rates. Even those that do can’t remotely keep pace with an inflation rate that is romping towards double figures.

On the other hand, about two million mortgage holders are expected to take an immediate hit as their repayments go up. Experts warn that those currently protected by fixed-rate deals are also in for a potentially nasty surprise when it comes times to refinance, with average two- and five-year prices rising at a record tempo.

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Furthermore, the rising cost of debt and borrowing will exacerbate problems faced by the many businesses that have yet to mount any substantive recovery since the pandemic.

Some research has suggested that a quarter or more of firms fear they will not survive to the end of this year, which could lead to significant job losses. The BoE expects unemployment, currently at 3.8 per cent, to reach 5.5% by 2024.

Bitter a pill though this may be to swallow, an increase in joblessness may be the only thing other than an end to the conflict in Ukraine that will make a dent to skyrocketing prices in the coming year. Right now the supply side of the economy – shortages of workers, materials, fuel and so forth – is stoking inflation far more than what is happening on the demand side.

Even so, members of the MPC seem set on further base rate increases to siphon off demand. Though some argue that stumbling economic activity will do that job on their behalf, in reality the only question is how fast the cost of borrowing will go up, and for how long.