The Bank of England must decide whether to raise interest rates immediately, as inflation fears are rising to 6 percent.

Governor Andrew Bailey has been under pressure to take action after yesterday’s headline CPI reading of 5.1% – far above what was expected and the most recent in a decade.

Analysts are now warning that while the Bank had predicted that prices would rise to a maximum of 5% by spring, it may reach three times the target of 2%.

Economists call on the Monetary Policy Committee for an increase in interest rates. However, some economists say that they will wait until the Omicron strain has had an impact. It is expected to announce the decision at noon.

This week, the International Monetary Fund cautioned that efforts should be made to reduce the cost spike but not too late. 

Pressure has been heaped on governor Andrew Bailey and top officials to act after headline CPI came in at 5.1 per cent yesterday - way above expectations and the highest for a decade

Governor Andrew Bailey has been under pressure from top officials and politicians to take action after yesterday’s headline CPI reading of 5.1% – far above what was expected and the highest in a decade

CPI inflation figures revealed yesterday were significantly above expectations

Yesterday’s CPI inflation numbers were substantially higher than expected  

Since the March pandemic lockdown, which was in effect from March to March of last year, the base rate has been 0.1%

Rising prices are piling pressure on the Bank to raise rates – hitting borrowers – but a hike could derail the UK’s fragile economic recovery from Covid. 

When inflation exceeds 2 percent, the Bank will usually increase the base rate. The Bank raises the base rate to encourage households and companies to save instead of spending, helping keep prices down.

However, with Omicron Covid fears keeping Christmas revellers and workers at home, the Bank’s Monetary Policy Committee that sets the Bank’s rates is concerned about whether a hike might halt the recovery.

Experts differed on how to proceed with the Bank.

Julian Jessop of Institute of Economic Affairs said that the Bank’s credibility is at risk if it fails to take action now to curb inflation expectations. 

He said that Omicron is more likely to increase inflation pressures through further disruption of supply chains than it is to lower them by dampening the demand.

Yaelselfin, the chief economist of KPMG said that the Bank of England would adopt a wait and see approach during this week’s meeting. This will allow for more time to evaluate the impact of Omicron on growth, inflation, and other factors.

Ms. Selfin said that inflation could rise in December again, peaking at more than 6 percent by spring.

“The pandemic’s latest setback could cause additional stress on supply chains. Inflation is expected to reach just above 6 percent in April. She said that continued supply disruptions during the Christmas season, combined with worsening delivery times from suppliers, could lead to inflation reaching 5.6% in December. 

According to the Office for National Statistics, November’s inflation rate was most affected by transport. The price of petrol and secondhand cars rose, leading to the largest increase in transportation costs. In November, the average petrol price reached 145.8p per gallon. This is an increase of 112.6p in a previous year.

Due to a lack of new electronic chips, used cars are now more expensive than ever.

Families began Christmas shopping and saw an increase in the price of games, toys, and hobbies.

After the IMF predicted that UK inflation would reach 5.5% in spring (the highest level since the 1990s), the ONS released the figures.

This rise will leave people struggling to stretch their finances. The IMF advised the Bank of England that it should not ‘inaction.

Kevin Brown (savements specialist at Scottish Friendly), said that “the cost of living is continuing rising sharply and quicker than what the Bank of England and many economists predicted.”

“Inflation in Britain is poised to hit its highest point in 30 years by 2022, but Omicron’s looming threat means that it is unlikely the Bank will raise interest rates today to further destabilize the economy and household finances. Inflation could rise further when rates are raised again in February.

“The Bank’s inaction means that households are now taking action to reduce the cost of living.

Scottish Friendly researcher Mr Brown stated that more than three out of every four families were ‘nervous’ about not being able to afford essentials for winter.