How the Bank of England's plan to increase interest rates could reduce inflation

But will it work?voted to increase the base rate to 3 per cent on Thursday.

“We do understand the difficulties of the situation we’re in and the difficulties mortgage-holders face,” he said. “If we don’t take action to get inflation down, things will get worse.” If people spend less on goods and services, the prices of those things tend to rise more slowly, lowering the rate of inflation. The Bank hopes to drive inflation back toward its target rate of 2 per cent.

Critics of the Bank’s decision also argue that it will deepen the oncoming recession, already forecast to last two years – the longest since records began.

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