A vast number of people have paid off their mortgages and would welcome any interest rate increase with open arms.
This number is set to increase as the postwar baby boom edges into retirement.

dave the investment, norfolk,

lol, may I right now commemorate with bulks of Britons who re bound to go bankrupt within several yrs' time due to an unprecedented house price crash in UK. believe me, it's gonna be really awful. thank Gordon B and others suchlike for that dire and inevitable outcome.

Berti, Warsaw, Poland

My personal experience is that my wages have remained static since 2002, but the cost of the main item I have wanted to buy has shot up by about 80% in that time. Namely property.
RPI is still a rip-off in the way that it is under weight in property prices.

NickT, Southampton, UK

I do not agree.Alot of the inflation is related to worldwide events. Our inflation is less than America's and they are moving rates downwards.A trip to the Eurozone shows how much the price of a cup of coffee has jumped there.and if you fancy a 20-million Euro villa in Majorca their interest rates are much lower..All of these upward rises in interest rates damage our economy which could quite happily grow at 4% like the Irish or the Danes or the Norwegians who have steamed ahead without the doomsayers and their masochisonomics.

Iain Kennedy, Glasgow, UK

Frankly interest rates should already have been at 5.75 to 6%. Minimum required to maintain real interest rates at at least 1.5 to 2% at a time where real inflation is ard 4%. Anything less and people think is virtually free. The way things are going I predict 7 to 8% before cycle turns.

John, London, London

As earlier suggested, I remain sceptical about the quoted 3.1% rise in the CPI. Most of the items in the CPI basket are discretionary - we don't have to buy them. But the real problem is the unavoidable expenditure, this is what drives up the cost of living for most of us. These are bills such as council tax, mortgages, insurances, repair bills, car tax, etc - ie. items which we cannot easily re-negotiate. For these items I would suggest that inflation is running significantly higher than 3.1%, probably double or treble that figure.

Charles, London, England

Good article on a little understood topic . You have to remember that the primary purpose (not declared) of any central bank is to accomodate government overspend. This applies whether it is nominally independent or not. Essentially this boils down to debasing the currency at the fastest rate possible consistent with not collapsing the system. So with supposedly "modest inflation" the £ buys less than half what it did 20 years ago based on the B.of E.'s own questionable figures. The value of a dollar has lost 95% since the invention of the Federal Reserve in 1913. This is what central banks call monetary stability !
Unfortunately, when stuck between a rock and a hard place the easiest course of action has an irresistable appeal. That is how the groundwork for hyperinflation is laid.
The worst aspect of this is that all price inflation is an indirect form of taxation which hits hardest at the poorest members of society. The rich can usually take avoiding action.

J. Mackay, London,

Look back to 2005-2006 and the BoE quarterly inflation reports predicted inflation being around 2% two years ahead. 3.1% didn't even appear in the projected range of inflation. And yet, in 2005 and 2006, as now the BoE is still predicting inflation to 'fall back to target by the end of the year'. When will they accept that setting interest rates today, based on their own future projections for inflation is totally flawed? It allows them to continually get away without setting interest rates at a sensible level. Are they really so scared that higher interest rates will break the house price bubble that has become the backbone of the UK economy? The success of Labour has been built on an unprecedented house price bubble due to low interest rates. Why should my money be devalued to protect those that have borrowed too much to pay for an over-priced house? The BoE should get on with their job and put interest rates up!

Richard, Bournemouth, England

Well done on this article! Clear, unambigous, to the point!
Why has it taken so long for The Times for taking such a position?
A few more questions. Are MPC members required to disclose their personal investments, at least by category of assets? Are they required to park their assets in blind trusts? If not, I see a very major conflict of interest.
Could The Times inquire about, for instance, recent investments in real estate by the MPC members?
Regards

Michele, Richmond, Surrey

Dami, why does the BoE have to juggle inflation with growth? I know the Fed has a duty to ensure growth adn low inflation, but the BoE only has to target inflation.

The BoE governor and MPC has allowed inflation to rise far too far, and needs to rein it in now or be sacked. Howeverr, part of the problem is Brown's inflationary finance policies of running a large deficit for so many years in the middle of economic growth. The BoE will have to offset that deficit financing, or Brown will have to rein back the public finances sharply - so countering inflation may be a Bank task, but government policy affects it too.

Neil Murphy, cromerr,

Will the MPC vote for further interest rate increases if it will bring about a house price crash that will damage tehir own personal wealth!?!

Paul, Altrincham, England

OK, I love my country and its people (all of its people) - I make no exceptions. And I am mortified at the ramifications of the 'present' property 'boom'. Either it is the latest 'half hidden' form of inflation, or it is the 'boom to end all booms' (tongue in cheek as greed will make this a recurrent syndrom) But one thing is for sure 'WHAT GOES UP COMES DOWN' either it will be house prices and the economy -- or it will be our currency and identity!!!!! So what do you think????

vicmac64, antrim, antrim

The BoE MPC has now been caught between a rock an hard place of their own making. Raise interest rates and risk popping the housing bubble (and take the economy with it) or leave alone and watch inflation rise inexorably upwards.

It is in Brown's interest to take the latter course - he can delay the economy exploding for longer and leave the next poor moron to pick up the pieces. That's why King has seemed to change course - more inflation, more time for his master! There is more chance of a snap General Election in May than the BoE raising rates by any more than the 0.25%. Any more will be an admittance of failure - and none of our 'leaders' could possibly admit that, could they?

Rob, Isle of Wight,

When inflation was this high last time rates were about 8%.
Roll on higher inerest rates and I look forward to the housing market crashing about 30%.

peter galpin, koh samui, thailand

I think Mr Earplug is a bit confused.
Suppose I get paid £10 a year but am taxed £2. If apples cost £1 then I can buy 8. Now suppose the price of apples doubles to £2. I can buy only 4. I need another £8 a year after tax to be able to afford as many apples as I could before. But in order to take home an extra £8 I will have to earn an extra £10 and pay an extra £2 tax. So my total salary needs to go up to £20. This is double my original salary. The same proportional increase as the price increase.

billy, London,

As the article says, it is not the printing of money that is the primary cause of inflation, but the government's printing of IOUs. Even if they are off-balance-sheet-Enron-style, there are no grounds for complacency.

Philippa Pirie, London, England

nonsense - interest rate setting is a very blunt tool for controlling inflation. There needs to be a combination of government fiscal control as well as interest rates. It's fair enough that the BOE is independent, however they need to do so work with the Treasury to have a consistent policy, rather than woking in different directions.

Max, Manchester,

I thought it was interesting that Mervyn King seems to have changed the MPC's raison d'etre. The MPC has a remit to target 2% inflation and so should have taken pre-emptive action to avoid this situation. Now in his open letter he seems to be changing the role to one of price stability ignoring the 2% target.

Stuart, Windermere, Cumbria

Excellent...I completely agree with you...well said.

Caroline, London,

Good article. No, a great article. It should strike fear into the hearts of all those who take the currently benign economic conditions for granted, such as BofE, Mervyn King, Gordon Brown, Tony Blair, Mr and Mrs Middle England.. the list is never ending...

Tony Marshall, Southampton,

Independence for the Bank settinginterest rates was supposed to be the panacea to protect against inflation - and the vicious, destructive UNvirtuous circle of wages chasing prices and impoverishment of pensioners. It looks as though it was pie in the sky.
Put this was all the rest of the mayhem Gordon Brown has caused and it makes a sour brew.

Dr J Findlater, Carnforth,

good article,however it takes at least 12 to 18 months for changes in the BOE base rates to pass on to the high street and thus we have at least 6 months to wait.
Moreover a 0.5 % increase in may and another 0.5% in august ,may well knock inflation back , but the time delay between rates and prices is still a economic point not to miss
?? recession next year

jay, manchester , uk

What I find irritating is that the media consistently understates the pay rise needed to keep pace with inflation as they forget about tax. A 20% tax payer needs a 6% pay rise to keep pace with 4.8% RPI (as he pays for goods out of after tax income). A 40% tax payer needs an 8% pay rise to do the same.

The comparison to money printing hyperinflation seems at first ridiculous, but is it any diffferent to the BofE allowing the money supply to expand at 14%.

The BofE are being irresponsible if they do not nip inflation in the bud - we need a 0.5% rise in interest rates in May and more to come.

Earplug, London,

Couldn't agree more.

Jonathan Davis, Essex,

This seems characteristic of the Monetary Policy Committee increasingly having to juggle control of the price level with maintaining good growth. Perhaps narrowing the MPC's remit is what is required.

Dami, West Bromwich, UK

An excellent article if I may I would add -
The Bank was given a CPI target of 2% with a generous contingency range of plus or minus 1% to allow for unforeseen events.
Leaving aside the fact that the the CPI target is an incomplete and inadequate control measure (another accident waiting to happen) the Bank made a major mistake by allowing inflation to move into and remain in the contingency range for too many months without taking steps to bring it back to target.
By doing so the Bank removed its contingency reserve to cater for unforeseen events.

Concerned, NI, UK

To me, the MPC lost all credibility when it panicked into lowering the interest rate several times after 9/11 when there was absolutely no need to do so. Unlike most economies at the time, the UK's was doing very well and was about to get a further boost with the massive injection of extra public spending previously announced by Brown. I disagree with Lord George's comments that otherwise the UK would have gone into recession The MPC have had loads of opportunities to rectify its mistakes by restoring the rate back to neutrality which I reckon is now in the 8-9% territory. This is actually historically the long-term average and it's still lower than it was 16 years ago when the RPI and monetary growth were last at today's figures which are still rising. But the economy today is much stronger than it was all those years ago...

CWW, Ipswich,

Is it not time for someone to say that the economic model we are using today has no place in the future of our world which is in trouble on so many fronts. Growth for growths sake is not the answer. We need to reflect on the Quality of life and the need for a caring and well educated society that does not need to consume consume consume. It is unnecessary and in the long term, maybe short term, crazy.
We are consuming so much rubbish to enhance our so called lifestyle and yet we are going backwards on almost every conceivable major aspect of what constitutes a decent life. Wake up before it is too late . Do we not have any thinkers left who can think through our current reality and produce a better model for society at large. The debate is currently so narrow in focus that everyone is pandering to the consumer and producer of tat. Lets enhance life and show that we have learnt something from the past. And that is certainly not by following the model of the United States which is lost

John Albert , Lisbon, Portugal

Human psychology is such that a group of people are more inclined to take risks than an individual. In the case of the MPC this has resulted in a tendency to reduce interest rates too quickly and raise them too slowly. If they raise the rate next time by only one quarter percent, it will imply that they have failed to recognize and counteract this tendency.

M Matthews, Banstead,

This reminds me of the catasclismic rate rises of the early late eighties/early nineties and the ensuing house price crash. The MPCs decision to actually CUT rates a year ago was a idiotic mistake.

Matthew Ridge, London,

The day house prices were removed from any kind of inflation measuring index ,was the day that legitimised a whole new breed of "loadsa-monies" these vested interests have fuelled the most irresponsible lending criteria that is likely to end in tears for many.Too many people have made too much by doing very little over the last 4/5 years --all because our ecomony is being wholly propped up via inflated house prices.

sue craig, bournemouth, uk

Perhaps the government could advise what lifestyle is required in order to see the (mythical) 3.1% inflation rate? I suggest that for most UK residents it is an absurd fiction.

Charles, London, England

I thought this would be obvious if you deliberately fuelled a consumer boom to avoid recession ?

At some point that debt has to be paid, inflation will not erode this debt that the consumer has taken on.

No more boom n bust ?

Thats the sort stupid comment you would expect from a man who sold half the countries gold at a loss to the taxpayer of £2 billion.

What do you expect, as Pink Floyd once said

"the loonies are on the grass"

Mark , London,

The economy has been driven by lax lending criteria largely driven by the Carry Trade. We have seen a massive injection of cash in to our economy that has seen the housing market overheat to unsustainable levels. This has encouraged even further borrowing through Mortgage Equity Withdrawal schemes which injects even more cash in to the economy. When you have such a massive injection of cash it inevitable causes prices to rise in the economy and so the inflation spiral begins. The CPI is nothing but a fudge factor calculation that does not even take in to account mortgages. Consequently, through this poorly calibrated measuring instrument, the interest rates have been set at too low a level for too long. It means that when inflation is eventually seen by the CPI figure, as it is now, that interest rates have to rise higher and faster than they would have done had inflation been measured properly in the first place. Many people's lives will be ruined by this incompetence.

Peter, Chippenham, Wiltshire, UK

I am afraid the genie is out of the bottle where inflation is concerned and will be very hard to put back. The MPC is merely tinkering at the edges with feeble 0.25% increments and should implement a full 0.5% rise next month if it is to be taken seriously. Even then they will have left it too late to prevent inflation taking off.

Welcome to the next round of 'boom and bust'.

peter anton, portsmouth,

Well said Graham Searjeant, and about time too!

There is far too much smug complacency in the MPC at the moment - an institution whose previous incumbent has had to confess that they engineered the current asset boom with a glorified asset price Ponzi scheme to avoid recession.

Well the news is, it didn't work. After the MPC took a laissez-faire approach to runaway asset price inflation after 2003 and overheated the printing presses, they have the gall to mumble about intervening now that the asset price bust is in sight.

Their credibility is questionable, because they have one blunt but very effective instrument to tackle inflation which they've consistently neglected. Moreover the most complacent MPC member of all doesn't even live in the UK!

Paul, London,

Surely the Chancellor's increased taxation plus, of course, VAT on petrol and diesel fuel together with the gas and electricity price rises can but lead to higher inflation. If Brown had any foresight at all he would have foregone the fuel tax rise until inflation had steadied but then he will always remain the seemingly grasping prima donna he appears to be.

Tony Quirke, Laity, Helston, Cornwall

they have simply created a credit bubble and housing bubble.

All bubbles end in bust.....so what is the point...reassures me I am right that no-one seems to want to do the right thing they are simply looking after their own interests.

david, bexleyheath,

From nine incompetents to the head incomptent (Mr. Pru.)
Dear Sir,
We screwed up, never mind it only affects 60 million or so people.
Have you got a shovel ?
Signed.... the barmy army.
ps: Is our wages and pension cheque in the post?

victor, Malaga, Spain

The late great Milton Friedman once said inflation is and will always be a monetary issue. The BoE is the begetter of its own dilemma, namely printing excess money (about 14% pa!).

This tide of cash has pushed up all asset prices. So stop the presses and raise interest rates. Recession is a dead certainty. Do we ever learn? No we don't.

jonathan tedd, marlow, UK

When you put nine economists in a room you will get
nine different opinions hence there will always be split
votes and camps within the MPC.
Maybe the composition of the MPC should be reformed
by appointing nine UK regional bank managers - they have
the experience at the economic coal face and receive feedback of their customers inflation expectations.

Robin, Farnham, UK