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Interest rates rising
All Areas > Legal & Finance > Money Matters
Author: Roger Downes, Posted: Sunday, 24th September 2017, 08:00
For the first time in a number of years there are serious rumblings in the City of London that interest rates are going to steadily rise over the next few months. We are told that any increases will be gradual and not dramatic, but they are bound to have an effect on our daily lives.
There is probably a whole generation of borrowers and savers that have known no other way than “borrowing is cheap and you can’t earn any money on your savings”. Is that all about to change? Is it a good thing if it does? How will everyone cope?
Inflation is running above government targets at close to 3%
The first reaction last month to the news that it was being seriously considered was in the currency markets. Sterling, which has been under severe pressure ever since the EU referendum result 15 months ago, reacted favourably and strengthened noticeably against the other major currencies, particularly the US dollar.
Inflation is running above government targets at closer to 3% than 2%. An increase in interest rates is often used as a tool to keep inflation in check and that will certainly be part of the Bank of England’s thinking.
Although we read headlines about pay pressure in the public sector, in private businesses wages are rising at a rate at least as great as inflation and with unemployment at near record low levels, the government may well decide that now is a good time to signal to the Bank of England that they think the population could ‘afford’ an increase.
Indications are that growth is strong and the economy should cope with a rate rise
An increase in interest rates is generally seen as being detrimental to economic growth, but all the indications are that growth, both current and forecast, is strong and therefore the economy should be able to cope with a rate rise.
It looks likely to happen. The Bank of England meets on the first Thursday of every month to review interest rates and it would be no surprise for there to be an announce-ment before the end of the year.
Is it a good thing? You will all have your own views as to how it affects you and that’s the point. It affects different people in different ways, so there is no one answer to such a simple question!Copyright © 2024 The Local Answer Limited.
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