The Bank of England may need to increase interest rates further to tackle inflation, despite mounting pressure on households from the rising cost of borrowing, senior Threadneedle Street policymakers have said. Jonathan Haskel, an external member of the rate-setting monetary policy committee (MPC), said the central bank could not rule out more hikes given concerns about stubbornly high rates of inflation. Suggesting the pinch felt by households from surging borrowing costs on mortgages and loans was a price worth paying to tackle inflation, Haskel wrote in the Scotsman on Monday: “As difficult as our current circumstances are, embedded inflation would be worse.” Haskel, a professor of economics at Imperial College’s business school, said the Bank of England recognised the pressure households and businesses were under, but said persistently high inflation had wider economic costs as well. “As policymakers, we are required to make difficult judgements,” he said. “My own view is that it’s important we continue to lean against the risks of inflation momentum, and therefore that further increases in interest rates cannot be ruled out.” The Bank has raised interest rates 12 times in succession since December 2021, from a record low of 0.1% to 4.5% – the highest level since the 2008 financial crisis. Financial markets give a 100% probability of rates being raised further at the next meeting of the MPC on 22 June to at least 4.75%, with the expectation that rates hit close to 5.5% before the end of this year. Britain’s housing market has come under increasing strain in recent months amid expectations that the Bank will increase interest rates further because of UK inflation remaining persistently high. Inflation fell by less than expected to 8.7% in April, as a stabilisation in energy prices was offset by the soaring price of food and drink. The Bank’s inflation target is 2%. High street banks have pulled mortgage deals for new borrowers because of a surge in demand before expected interest rate rises, while housebuilders have cut back on the construction of new homes. Catherine Mann, another external MPC member, said later on Monday that household and business expectations for the UK’s inflation rate were still too high to be consistent with inflation returning to the Bank’s 2% target. Although saying that inflation expectations were on a “downswing”, official figures showed core inflation – which excludes energy and food – remained stubbornly high. Speaking at an event hosted by US political strategists Signum Global Advisors, she added: “This is a concern for getting to our 2% objective.” Some economists argue that further rate increases are not required to bring down inflation, amid signs of a slowdown in the UK’s jobs market and the fact that many households are yet to feel the full impact of previous hikes. This is because people with fixed-term mortgages, which were struck when rates were lower, will not see the effect of previous increases on their repayments until their deals end. James Smith, an economist at the Dutch bank ING, said expectations in financial markets for growth in UK workers’ wages were among the reasons investors expected interest rates would increase further. With near-record numbers of job vacancies, average wage growth has risen sharply – but remains below inflation. Smith said: “UK wage growth is peaking and on its own, that doesn’t scream a need for the Bank of England to keep hiking much further,” he said.