Higher-for-longer interest rates are slowing growth, says IPPR

Responding to the latest MPC decision, Carsten Jung, associate director for economic policy and AI at IPPR, said:

“At the start of the year, markets expected the Bank of England to cut interest rates twice in 2026. With the Iran war energy shock pushing inflation higher, investors now see rates staying higher for longer, with further increases still on the table.

“Despite this week’s US-Iran agreement, higher inflation is still to come, as higher energy costs ripple through the economy. The Bank confirmed today that it is concerned about this and is ready to raise rates, which would slow growth.  

“The government is not powerless in this. It should lower energy prices directly – for instance by taking levies off energy bills – to help lower inflation and ease the pressure on the Bank of England. This would also support growth while protecting households from higher costs.”  

ENDS

Carsten Jung is available for interview  

CONTACT

Rosie Okumbe, digital and media officer: 07825 185421 r.okumbe@ippr.org

David Wastell, director of news and communications: 07921 403651 d.wastell@ippr.org    

NOTES TO EDITORS

IPPR is the UK’s most influential think tank, with alumni in Downing Street, the cabinet and parliament. We are the ideas factory behind many of the current government’s flagship policies, including changes to fiscal rules, the creation of a National Wealth Fund, GB Energy, devolution, and reforms to the NHS. IPPR is an independent charity which has seconded staff to government departments including DHSC and DESNZ to support ministers on crucial policies such as the 10-year health plan and the industrial strategy: www.ippr.org