Calls for first rate rise in a decade

City an­a­lysts say mon­e­tary pol­icy has ‘done its job’

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Many econ­o­mists be­lieve the time is not yet right for UK in­ter­est rates to in­crease but City an­a­lysts dis­agree, call­ing for the first base rate rise in more than a decade. Num­ber crunch­ers at in­vest­ment bank Beren­berg claim that mon­e­tary pol­icy ‘has done its job,’ and called for ‘pol­icy to be­gin to nor­malise.’

Beren­berg’s anal­y­sis shows the Bank of Eng­land used in­ter­est rate ma­nip­u­la­tion to meet four ob­jec­tives fol­low­ing the fi­nan­cial cri­sis. These were to sus­tain­ably re­turn in­fla­tion to 2%, sup­port as­set prices and aid bal­ance sheet re­pair, in­crease the flow of credit to the real econ­omy, and re­turn the econ­omy to full em­ploy­ment.

‘Mon­e­tary pol­icy has achieved all of these aims,’ Beren­berg’s team say.

Beren­berg spec­u­lates that a rate rise could come as soon as Novem­ber’s meeting of the Bank of Eng­land’s Mon­e­tary Pol­icy Com­mit­tee (MPC). The MPC’s last gath­er­ing in early Au­gust saw a vote of six to two to main­tain rates at 0.25%.

The head­line base rate last in­creased in July 2007, go­ing from 5.5% to 5.75%. The global fi­nan­cial cri­sis a year later saw the Bank of Eng­land slash rates to 0.5% where they stayed un­til Au­gust 2016, be­fore be­ing cut to the cur­rent his­toric low of 0.25%. (SF)


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