With underlying inflation at its highest level in decades and rising quickly, maintaining a negative real cash rate is hard to justify. Especially as we see further strong upward pressure on major components like wages, rents, imports and energy.
The increase in rates so far is not nearly enough to get the economy back on target soon. It hasn’t even been enough to raise the exchange rate, the most important channel by which monetary policy influences inflation.

There remains a large risk that expectations of inflation will start to adapt to recent prices increases. This is asymmetric – the risk of a downward adjustment is negligible. If expectations do rise, a large increase in unemployment will be needed.

We have a choice between a sharp increase in interest rates now or an even larger increase if we delay. The former would be less painful and less risky.