Interest Rates & Inflation – News

Inflation edged up to 1.3 per cent in latest figures and two members of the Monetary Policy Committee continue to vote for an increase in interest rates. Many have thought for some months now that it wouldn’t be long before interests rates began to rise in the UK, particularly as Mark Carney (Governor of the bank Of England) has repeated hinted and then made u turns.
 
However, both the markets and most economists have pushed back the chance of a rate move of a first 0.5 per cent to late 2015 due to low inflation concerns. If inflation did suddenly increase and was sustained across a number of developed economies this would of course make a difference.
 
The Bank of England have reiterated that any rise in the base rate next year will be very be gradual and that for the foreseeable future, normal levels of interest rates would be at around 3 per cent.
 
Pleasingly for those with debt, Interest rates may remain stuck at 0.5 per cent until next autumn and inflation could fall below 1%, according to the latest Bank of England Inflation Report.
A move towards further low inflation and financial troubles in the Eurozone countries has pushed back analysts expectations of when the bank rate will be raised.
 
The vast majority of the reasoning for the current forecast for rates relies on inflation in the US, Europe and UK remaining low and growth failing to recover.
 
However, financial markets and economies never fail to surprise us so if things improve quicker than expected, or if something unpredicted happens such as major quantitative easing in the Eurozone then interest rates could shift sooner than expected. The potential for major central bank surprises was highlighted less than two months ago, when the Bank of Japan launched its stimulus plan.
 


Interest rates will remain fixed at Atpledge regardless of any movements in global interest rates for the foreseable future.