Loading ...Will borrowing costs go up this year? The Bank of England has started signalling that base rate may rise in the coming months. The unequivocal warning comes from one of the bank’s policymakers, Andrew Sentance, in an interview in today’s Guardian.
Controlling inflation will be the reason and Sentance says it would be wrong for markets to assume base rate will stay at the unprecedented low of 0.5% throughout 2010. His exact words? :- “It would not be wise to put yourself in that camp. A lot can happen in a year. In 2008, we moved from a position where the economy was growing quite healthily at the beginning of the year to diving into deep recession by the end of the year………last year we moved from the position where a deep recession was getting deeper to a position where the economy is now recovering, albeit in an early phase. It would be wise not to be too definitive about what to expect this year.”
It’s fair to say that nothing in the interview suggests a central fear that inflation will run out of control; but it does show that the fight against it remains a key policy aim.
Other pertinent topics covered were Quantitative Easing and the possibility of a so called “double-dip” recession. Sentance seems to dismiss the latter risk, while warning that the recovery will be fragile though. On the former he suggests that whilst further stimuli will probably cease, it is unlikely the underlying liquidity boost of £200bn will be swiftly reversed.
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