Tuesday, 24 April 2012

No increase in interest rates for next 2 years...

Mortgage market experts, fund managers and economists are predicting that, despite March's shock rise in inflation the base interest rate will remain at the record low level of 0.5% until 2014, and that it quite possible will not rise for another three to five years.

Consumer price index rose from 3.4% to 3.5%, while only a rise of 0.1%, it is still significantly higher than the government's target rate of 2%. This prompted some speculation that the Bank of England monetary policy committee might raise interest rates in an attempt to curb inflation: former monetary policy committee member Andrew Sentance wrote in the Sunday Telegraph that "rising interest rates could soon be back on the agenda".
But other economists and financial experts are doubtful there will be sufficient improvement in the UK economy to enable the monetary policy committee to raise interest rates before the end of 2013 at the earliest.

Robert Gardner, chief economist at Nationwide building society, said there was too much volatility in economic data to enable the monetary policy committee to gauge accurately the strength of the economy. This volatility would be exacerbated in 2012 by the Olympics and the diamond jubilee.

"The Bank of England will want to make sure [the economy] is really gaining momentum before it risks raising interest rates," he said.

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