fbpx

Interest rate rise is still a risk

Nia Williams

June 13, 2014

Commenting on Mark Carney’s Mansion House speech, he said: “If the central bank repeatedly announces changes to when it’s going to increase interest rates, these warnings risk losing credibility.

“Initially the forward guidance was there won’t be any rate rises until unemployment falls below 7%. Then this happened and the bank then pointed to a rise in 2015. But now there are noises that it could be this year. It seems like a moving target.

“It’s important that there are no knee-jerk reactions to the current discussions about house price increases. There’s evidence of the rate of price increases levelling off in London and areas outside the city haven’t seen such large increases.

“The economic situation is still uncertain and we could soon see oil prices go up as a result of events in the middle east.

“Interest rate rises are a macroeconomic policy tool. Since the financial crisis interest rates have been incredibly low for a very long time, but people still have a lot of pressure on their disposable incomes.

“Putting up interest rates now risks damaging the recovery and people might be very sensitive to the increase in costs that it brings.

“Even just a small increase of 0.25% really does make a difference to those on the margins.”


Sign up to our daily email