Looks likely that Gordon will be running off to the country in November then...(before it gets any worse)!

Pete Balchin, Solicitor , Bristol, UK

this is an ongoing problem, caused by a rate of official inflation too dissociated from the spectrum of goods and services purchased. the official rate has been around 2.5% for the last 10 years, assuming real price inflation of around 3.5% this means that wages have deflated on average by about £2500 over the last 10 years( based on an average salary of £24000), i know this doesn't sound a lot by that uses conservative figures. and just think how you would feel with and extra £150 per month net, might make a dent in the credit cards or that mortgage a bit easier to deal with?

Ben, folkestone, uk

I wonder if the government has considered putting restrictions on new lending instead of across the board rate rises that primarily inflict pain on those who have already borrowed? repossessions don't help anyone.

and, if it were actually the case that interest rate rises persuaded people to stop borrowing and maybe save instead, there might be some point in these piecemeal rises. unfortunately, as chris points out below, the result would seem to be that salary demands simply increase to match the cost of living. increasing interest rates in this way simply fuels inflation.

jem, london, uk

The Bank should never have made its quarter-point cut in interest rates about 2 years ago - that was their biggest mistake as it sent a signal to borrowers that the Bank would ease off on rate-raising at the first sign of trouble and they would be bailed out of their debts and rescued by rising house prices.
If the Bank had remained hardline throughout the last few years of asset-price, and what is now emerging as consumer-price, inflation, they wouldn't need to raise rates higher now. The US Federal Reserve has been much tougher on inflation and it is ultimately going to be better for the economy there than the BoE hiding its head in the sand and hoping inflation goes away without doing any harm.

MB, Edinburgh,

A year ago people were saying it would never go above 5% or that at the outside te peak would be 5.25%.

I guess reality isn't as benign as these widely-believed "predictions" stated.

David Carboni, Guildford, Surrey

high interest rates boost inflation!
any views on this?

wil doyle, east hoathly lewes, uk

Expectations of change in borrowing behaviour from interest rate rises may no longer match past patterns for several reasons.

First, the generally much lower interest rates over the past fifteen years compared with previous periods and long term averages renders incremental change relatively insignificant for borrowers.

More importantly, a greater variety of borrowing instruments and greater borrower sophistication has added a dynamic aspect to refinancing. As house equity has increased, re-financing has become the norm.

Borrowers have also learned the possibilities of staggered repayments of different loans, using part-proceeds of loans to fund a series of other repayments.

The diversity of borrowing management may have added unpredictability to interest rate change outcome.

dr venables preller, Warminster, UK

As Chris Heaton rightly says, incremental increases do not give a clear enough signal - to use the analogy made popular by a management book a few years ago, it is a case of the boiled frog (increase the temperature of the water gradually and the frog gets sleepy until it is too late - increase the temperature rapidly and the frog escapes with only scalded toes).

Back at the spring it was becoming clear (judging by the comments of many analysts and commentators and at least one MPC member) that we would need rates in the region of 6%+ to cool inflation fed by consumer and business borrowing (and the mispricing of risk and assets). The BoE would have made its job easier if it had raised rates by at least 0.5% in May (as at least one MPC member suggested - perhaps not strongly enough).

At the same time as making it clear that it won't bail our reckless borrowers and lenders, the BoE should also make it clear that it won't bail out reckless market speculators who misprice risk.

Huw Sayer, Norwich, England

Of course, this all looks wonderful in the slightly rareified air of senior economists salaries and mortgage commitments. The rises already brought in are going to hit a lot of people, myself included, very hard indeed in the next few months. I suspect a hawk or two (with comfortable incomes and no personal risk) expects pre Christmas spending to cover a real reduction in public confidence. Note further that proportion of workers who are Government empolyees funded by taxation. If rates rise and their already relatively marginal incomes are squeezed further then their unions may well make understandably higher pay claims thus driving demands on taxation.

Of course, I'm not an economist, just a government employee trying to pay a mortgage on an ordinary house in an ordinary area.

Andrew Fanner, Cowplain, UK

I wonder if this is the same Chris who writes in the blog on the House Price Crash web-site?

However, I think he is right. I did think IR's would reach 6.5% before xmas this year. Some economists think this is unlikely. I think that 6% before xmas seems a foregone conclusion, but don't forget that the markets some 2-3 months ago were pricing into their deals, IR's at 6.5% and there is a very real double pincer between sub prime problems and the need therefore to lower rates and the risk of a run on Sterling and/or the Dollar. The plot thickens..........

Pete Balchin, Solicitor , Bristol, UK

Raising interest rates little by little never caps inflation as quickly as "economists" believe it will. Instead we experience a spiral upwards of inflation and interest. It will not top out at 6%. The initial reason for this is that interest is just another cost to business. If that cost goes up, then to maintain margins prices go up. As prices go up, wage inflation starts to creep - which it already is doing out here in the "real" world. So prices go up again to cover this increase in cost - and they stick for the time being because the real increase after wage inflation does not deter the consumer. As long as jobs are relatively plentiful, and the interest rate increases are relatively small and spread out over time, past experience says that we will sleep walk to interest rates of at least 7.5% before they even start to have an effect.

Chris Heaton, Sheffield,