Rishi Sunak pleads with Brits to ‘hold our nerve’ in face of sky high interest rates and inflation

Prime Minister Rishi Sunak has urged the country to “hold our nerve” with sky high interest rates in order to beat down scorching inflation.

Sunak today on BBC’s Sunday With Laura Kuenssberg programme gave his full backing the Bank of England’s latest interest rate rise as Tory backbenchers slammed Governor Andrew Bailey for being “asleep at the wheel”.

 “The Bank of England is doing the right thing. The Bank of England has my total support,” the PM said, adding that “inflation is the enemy”.

Fears have mounted in recent weeks over elevated borrowing costs tipping the UK into a recession.

Members of the nine-strong monetary policy committee (MPC) last week jacked up official rates 50 basis points to five per cent, their highest level since 2008.

But financial markets think the Bank will have to go further to strain inflation out of the UK economy, betting that rates will peak at more than six per cent.

Some 1.4m homeowners are expected to have 20 per cent of their disposable income wiped out by higher mortgage repayments when they roll on to new contracts with rates of around six per cent, according to the Institute for Fiscal Studies.

“I get that this is challenging, but we’ve got to stick to the course,” Sunak said.

“I want people to be reassured that we’ve got to hold our nerve, stick to the plan and we will get through this,” the PM added.

Inflation remained stuck at 8.7 per cent in May despite Bailey and co already lifting rates twelve times in a row in the most aggressive tightening cycle since the 1980s. It had been forecast to fall to 8.4 per cent. Last Thursday’s rate rise was the thirteenth straight jump.

Core inflation has risen to more than seven per cent, while services prices – which the Bank watches closely – are also accelerating rapidly.

Persistent inflation overshoots has sparked sharp criticism of Governor Bailey, with experts and MPs claiming he and the rest of the MPC should have increased interest rates at a faster pace over the last year and a half.

Former Conservative Party chair Sir Jake Berry today on GB News claimed Bailey has been “asleep at the wheel” and even urged the government “to look for someone else who’s got a better plan”.

Economists have cast doubt on whether Sunak will reach his goal set earlier in the year of halving inflation to around five per cent by Christmas. 

Ultimately, the Bank is responsible for keeping inflation at the official two per cent target, not the government.