The lesser-spotted grebe of a rate rise may be about to land

Comment Martin Flanagan

It was ironic yesterday that just as the Bank of England’s governor was suggesting rock-bottom interest rates could rise for the first time in a decade in the “relatively near term” latest data showed the economy slowing.

The Office for National Statistics, revising down its year-on-year reading for GDP in the second quarter to 1.5 per cent from a previous 1.7 per cent, says there has been a “notable slowdown” in growth in the first half of 2017. However, the slowdown was widely expected since last year’s Brexit vote, and the change in degree is marginal, so it is unlikely to stay the hand of Mark Carney and the Bank’s monetary policy committee in instigating what would be the first rise in rates in a decade. That rare bird finally looks about to land.

Many analysts now believe that November is the most likely timing for such a monetary tightening. The truth is that a likely quarter-point rise in rates is unlikely to upset either households or business. And Carney has repeatedly said that when rate increases come from the current 0.25 per cent they will be limited and gradual to ease the process, and are likely to settle below long-term average rates.

This lower-for-longer template may not be popular with savers, but it is designed to avoid sudden shocks to the UK economy amid the ongoing Brexit uncertainty.

After false starts over the past two years and more, when the Bank has proved an unreliable boyfriend on rate rises, it finally looks as if we may be finally about to get one.

It says it all about the financial crisis and the tough decade we have been through that there are many twenty-somethings and thirty-somethings in the City who have never actually experienced the vaguely pungent idea of a rate rise. There may be some nosebleeds.