Bank of England member warns of 'inequality' as interest rates remain at 5.25%

12 October 2023 , 09:07

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Younger and low-income workers could be forced to bear the brunt of the nation's high interest rates (Image: 2023 PA Media, All Rights Reserved)

Younger and lower-income workers could be hit hardest by the nation's high interest rates, warns a Bank of England policymaker.

Dr Swati Dhingra, a member of the Monetary Policy Committee (MPC), expressed her concerns about the impact on households and businesses to the BBC, saying: "The economy's already flatlined. And we think only about 20% or 25% of the impact of the interest rate hikes have been fed through to the economy."

She added that inflation, weaker spending and job cuts triggered by higher rates all affect younger and lower paid workers the most. "The kinds of price increases that we're seeing, which is energy and food, those will typically impact those people more", she said.

"And then the interest rates will also typically impact younger, less educated people more. So, eventually when we come out of all of this, we're going to see that possibly inequality is going to rise."

Dr Dhingra, in light of the Bank's prediction of slower UK economic growth in the coming months, warned that the UK "should be prepared" for a potential recession.

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She stated: "When you're growing as slowly as we're growing now, the chances of recession or not recession are going to be pretty equally balanced. So we should be prepared for that. It's not going to be great times ahead."

The policymakers are scheduled to meet again in November.

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Steve Charnock