Borrowers warned they face more interest rate hikes this year

Borrowers will face another painful rate hike next week after a Bank of England official said more action was likely needed to beat inflation.

Jonathan Haskel, a member of the Bank’s Monetary Policy Committee (MPC), said further increases ‘cannot be ruled out’.

The comments did not diminish market expectations of a 13th consecutive rate increase when members of the MPC announce their next decision on June 22.

That brings interest rates from 4.5 percent to 4.75 percent. Each increase adds hundreds of pounds a year to mortgage payments.

Rates are expected to reach 5.5 percent by the end of the year and are likely to remain above 5 percent in 2024. The dramatic rise in expectations for interest rates has caused mortgage rates to soar.

The Bank of England is fighting to keep inflation under control, which is above its target of 2 percent.

Mr Haskel wrote in The Scotsman: ‘My own view is that it is important that we continue to lean against the risks of inflationary momentum, and therefore further rate hikes cannot be ruled out.’

Prime Minister Rishi Sunak and Chancellor Jeremy Hunt have suggested they would accept a recession if that was the price of curbing inflation.

Britain’s wave of inflation has been fueled by events such as rising food and energy prices, exacerbated by the Russian invasion of Ukraine last year.

The Bank of England’s fear is that the initial spike will become stalled as workers demand higher wages to protect living standards and companies raise prices to protect profit margins.

Mr Haskel said: ‘As difficult as our current circumstances are, embedded inflation would be worse.’

> Interest rate increase calculator: how will the increases affect your mortgage?

The outlook for interest rates has turned bleak in recent weeks, after official figures showed that inflation, while falling below 10 percent for the first time since last summer, has fallen more slowly than expected.

And rate setters are concerned that so-called core inflation — which erases volatile energy and food prices — is rising.

Mr Haskel said: ‘Things are looking better than a few months ago.

Since October last year, inflation has fallen from 11.1 percent to 8.7 percent and we expect it to be around 5 percent by the end of this year.

“But inflation remains much too high.”

He acknowledged the pain higher rates would cause by adding higher borrowing costs.

“We understand that this will be difficult for some people and it is an important consideration in our policy decisions,” Haskel said.