There was more bad news for Britain's under-pressure businesses and consumers today when it was predicted that interest rates could jump to an eye-watering 6%.

The warning came from a founding member of the Bank of England's monetary policy committee (MPC).

Willem Buiter, who joined the panel of rate-setters when it was established in 1997, said the bank will be forced to raise interest rates to 6% to tame soaring inflation.

He said policy will need to be "seriously restrictive" to bring inflation down to the bank's 2% target.

Mr Buiter told the Telegraph: "It won't be pretty. There will be a recession."

Interest rates are currently at 1.75%, while inflation is now above 10%.

The last time interest rates were at 6% was way back in February 2000, when Britney Spears was top of the singles chart with "Born To Make You Happy".

Bank 'failed to spot signs'

Mr Buiter's comments came as almost a dozen former rate setters said the Bank of England had failed to spot signs that the economy was overheating last year.

"The bank was, and continues to be, too slow in responding to rising inflation," added Mr Buiter.

Charles Goodhart and Dame DeAnne Julius, two other MPC founder members, warned that policymakers would struggle to get price rises back under control.

Dame DeAnne said: "My best guess is for the bank rate to peak between 4% and 5% before coming down again, but this may take several years."

Mr Goodhart said policymakers faced a challenging trade-off between controlling price pressures and supporting growth.

He added: "My guess is that the bank will stop raising short-term rates slightly above 4%, but that will not be enough to bring inflation back to target."

Mr Goodhart expected inflation to remain stuck at around 3.5% in the coming years.

Bailey under fire

Andrew Bailey, the Bank's Governor, has come under fire for failing to get a grip on inflation.

Price rises, as measured by the consumer prices index, currently stand at 10.1% - way ahead of the bank's own 2% target and a figure which is forecast to rise further in the coming months as average energy bills soar.

The Telegraph says that, while much of the surge is due to Russia's invasion of Ukraine, recent data suggest inflation is becoming more entrenched.

Liz Truss, the Foreign Secretary, has said she intends to review the bank's mandate if she becomes prime minister to "make sure it is tough enough on inflation".

However, policymakers warn that changing the mandate at a time of volatile price pressures could trigger a sterling crisis.

The UK's current account deficit, which measures trade and other cross-border transactions, is at a joint record high of 7.1% of gross domestic product. This leaves the pound vulnerable to a sharp fall in value if overseas investors pull their money out of Britain.

Martin Weale, who served on the MPC between 2010 and 2016, said political meddling combined with big spending pledges was a big risk.

Weaken the pound

He told the Telegraph: "If there's talk of changing the mandate, to the extent that politicians may become more involved in setting interest rates, that will weaken the value of the pound.

"Foreign investors would sell sterling because they feared future inflation. And a falling exchange rate would then itself aggregate inflation.

"And, if you're doing that at the same time as having a marked increase in government borrowing, that could feed into a sterling crisis."

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