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  We are in the early stages of a major programme of fiscal tightening after ten years of loose fiscal policy. To tighten monetary policy significantly at the same time is a sure-fire recipe for a double-dip recession. Hiking interest rates now would also skew the yield curve to such an extent that public borrowing costs would rise substantially. The indirect tax rises already implemented (and not yet in the inflation figures) together with planned cuts in public spending will cause consumer demand to slacken later in the year, achieving the same effect as a major rise in interest rates.

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