In an article that appeared in the Daily Telegraph on January 13th (view article here), I argue that the Bank of England has to drive interest rates higher. Structural changes in the UK mortgage market mean that the transmission mechanism between UK interest rates and the UK economy is weakening. UK inflation is the highest it’s been in more than a decade, and real interest rates (which are what really matter) are still very low. The Bank of England’s raison d’etre is to control inflation, so control inflation it will, even if it means risking an economic slowdown. Rates will therefore have to climb higher.