Rishi Sunak has admitted his promise to halve inflation by the end of the year has “become harder to deliver” as the government comes under enormous pressure on Britain’s faltering economy.

The Prime Minister said he remained “confident” that he could achieve his target of halving inflation by the end of 2023, after the Bank of England was forced to raise interest rates from 0.5% to 5%.

Economists warn that Britain is now on the cusp of a recession – predicting that the Bank’s larger-than-expected rise will hit the economy “like a giant wave”.

Facing accusations from senior Tories that he was “sleeping at the wheel” because of inflation, Bank Governor Andrew Bailey lashed out at the company’s bosses – blaming them for fueling inflation by How to ask for a raise.

Calling the raise “unsustainable”, Mr Bailey insisted: “We cannot continue to maintain the current rate of increase” – before warning companies not to “seek to rebuild profit margins”. profit” by raising prices.

Prime Minister Jeremy Hunt will meet banks to ask if they can do more to help struggling households deal with the deepening mortgage crisis and the impact of rate hikes. shocking or not.

Scheduled for this morning at Downing Street, the meeting will include major lenders such as HSBC and Santander.

With growing pressure on the government to ease the situation, Prime Minister Rishi Sunak and Prime Minister Hunt ruled out direct financial intervention, as the Bank of England aims to tackle high inflation. continuously through increasing interest rates.

Labor has called for mandatory support from banks for struggling mortgage holders while some backing Tories have demanded support for under pressure borrowers.

Mr Hunt’s approach is expected to focus on assessing whether lenders are living up to their pledge to provide appropriate support to those struggling to make payments.

Both must hope this intervention will eventually resolve the inflation crisis, say James Moore.

Interest rates are a measure of how high the cost of borrowing money is or how high the savings reward is.

If you’re borrowing money, usually from a bank, the interest on that money is what you’ll pay when you borrow it.

It is a fee on the total amount of the loan and will be displayed as a percentage of the total amount.

A higher percentage means paying more to the lender to borrow money.

If you are saving money in a bank account, the interest on that money is the amount you will accrue on your savings. Banks will pay you a percentage of your total savings, usually at the end of the year.

Changes in the Bank of England’s prime rate, the rate that elite banks borrow from Threadneedle Street, have a knock-on effect on the interest rates it sets for mortgage borrowers. their.

These changes will also affect anyone with savings and anyone taking out a loan from a bank.

It will also have a broader impact on the economy. By raising the prime rate, the BoE hopes to curb soaring inflation and help resolve the cost of living crisis.

Since 1997, the job of the Bank of England has been to set interest rates. Previously, the decision was made by the prime minister of the finance department, but over time consensus has grown that this is one of the causes of Britain’s chronic inflation problem.

Why did politicians give up interest rate control 26 years ago, ask John Rentoul.

Prime Minister Rishi Sunak has admitted rising interest rates are “difficult” for cash-strapped Britons, but vowed the Government will be “steadfast” in its fight to contain inflation after the Bank of England announced produces a shocking 5% increase.

The bank unexpectedly raised interest rates by half a percentage point to the highest level in nearly 15 years, with policymakers and the UK Government under increasing pressure to bring the spending crisis under control. cost of living.

The move is set to deepen the mortgage crisis as borrowing costs rise for the 13th time in a row.

Speaking at the Times CEO summit in London, the prime minister said: “The reason interest rates are going up is because inflation is so high and we have to bring it down.

“This is what makes people poorer, that is the effect of inflation.

“That’s why we have to control it, we have to reduce it and interest rates are part of that.

“Now, I always say this is going to be hard and obviously it’s been harder over the last few months but it’s important that we do it.

“The government will stick to its roadmap and stick to the plan to make it happen.”

The central bank’s prime rate is currently at 5%, after its monetary policy committee chose to raise it for the 13th time in a row since March 2020, as Bank officials sought to tame the rate. high inflation for many decades.

While markets were bracing for a hike in the prime rate to 0.25%, fears of a more serious rate hike grew on Wednesday after official figures showed inflation had softened. unabated – while worrisome is that core inflation – which excludes food and energy – has hit a 31-year high.

Supermarkets have been warned by the prime minister that they must behave “responsibly and fairly” when setting prices as consumers fend off rising costs.

Rishi Sunak said he would like to see the burden of weekly shopping bills “reduce” as ministers engage with retailers on pricing.

Prime Minister Jeremy Hunt has confirmed that ministers are talking to the food industry about “potential measures to ease pressure on consumers”.

The comments by two leading figures in the Government come after Bank of England Governor Andrew Bailey suggested that some retailers are raising prices as a way to boost their profit margins during the recession. persistent inflation.

The bank on Thursday announced a shock rate hike to 5% as inflation remained steady throughout April and May, with Consumer Price Index (CPI) inflation remaining at 8.7%. although it is expected to decrease.