Good news for savers – interest rates will rise before the end of the year, potentially more than once. Bank of England Governor Mark Carney this morning confirmed that if the UK economy stayed on track there would be a rate rise at the next Monetary Policy Committee meeting on November 2.
“The majority of MPC members including myself have said that if the economy continues on this track it may be appropriate to raise interest rates,” he said. “If the economy continues on this track, and all indications suggest that it will, then you should expect in the relatively near term for interest rates to rise. Interest rate increases when they come will be to a limited extent and gradual.”
Speaking to the BBC Carney said that the Bank had provided stability and support to the economy by lowering rates following the global financial crisis in 2008 and again post the Brexit referendum last year.
“The system is well designed, the big decisions rest with Parliament. They decide what powers the Bank should have. A key element of this system is we have a responsibility to identify risks in the economy, highlight where there are emerging vulnerabilities,” he said.
Since the Brexit vote the UK economy has remained robust, with latest GDP figures from the Office for National Statistics showing 1.5% annual growth in the three months to the end of June. This is the slowest rate in four years, but is a far cry from the recession predicted by many prior to the referendum. UK GDP grew 1.8% in 2016.
Unemployment is at an all-time low of 4.3%, with the latest figures showing that in the five months to the end of July the number of people in work increased, with a total of 32.1 million people in work. The employment rate was 75.3%, the highest since records began in 1971.
Carney admitted that there had been a downtick in productivity since the global financial crisis, and that the Brexit vote has resulted in a "period of uncertainty" which would cause short-term damage to the UK economy. The Governor dismissed the idea that there was a debt bubble which would adversely affect households should interest rates rise.
