ME Group boss, Rob Cooper, fears the Bank of England’s decision to raise interest rates, could be a double hit for the financially vulnerable amidst soaring prices and borrowing costs.

The base rate increase to 0.25% from 0.1% is aimed at suppressing inflation, but many believe Omicron could cause the UK economy to hang in the balance.

Mr Cooper believes the rate rise may fail to curb inflation, but rather leave cash-strapped households with a lot think about this winter as their mortgage and energy costs climb.

‘The rate rise is designed to stifle further inflation, but that only works if inflation is being driven primarily by consumer demand,’ he said.

‘Without doubt, rising inflation is in part due to extraordinary supply chain issues across a wide range of industries, which may not be curtailed by a hike in interest rates. If costs pressures continue to push prices higher, it will require spending to be squeezed further with additional rate increases creating further stress on household finances.’

Inflation is currently at 5.1%, which is the highest in a decade, and expected to hit 6% in the spring.

The vote in favour of the interest rate rise was eight to one by members of the Monetary Policy Committee (MPC).

Mr Cooper, who is the CEO of ME Group – a LegalTech company that helps law firms gain redress for victims of financial mis-selling, believes the move could cause the UK economy to significantly slow.

He added: ‘There is every risk that inflation will continue to soar because of these exceptional circumstances, without a corresponding increase in consumer spending. ‘If Omicron, or further Covid-19 restrictions cause a dip in the economy, the Bank of England may have just pushed the recent growth into reverse.

‘That aside, rising credit costs, particularly in the mortgage sector, will put further strain on already struggling households at a time when fuel bills continue to rise, and we run into the normal post-Christmas financial squeeze.’