Rates will "definitely" stay low

14/08/2009

The Bank of England is very likely keep interest rates low over the next few months, an expert said today.

Hetal Mehta, senior economic advisor at the Ernst & Young ITEM Club, pointed out that low inflation would allow the institution to avoid raising the rate from its current all-time low of 0.5 per cent.

This is good news for Britain's homeowners, as low Bank of England rates generally translate into low mortgage rates on the high street.

Generally, keeping interest rates low pushes inflation rates up - because people who pay less on credit repayments have more money going spare, thereby creating demand for goods and services.
However, the Bank's own Inflation Report, released earlier this week, showed that annual price rises could dip as low as one per cent towards the end of the year.

The institution's "ideal" inflation rate is higher, at two per cent.

Ms Mehta said that rates would "definitely" stay low in the near future - but might rise sharply when the Bank finally decides to impose increases.

"The Bank does have a clear remit to keep inflation under control and the minute it starts seeing inflationary pressures … there is a strong chance that they might start reversing their policies quite quickly," she added.

Tags; Current UK Economy, Young Family Finances, Credit Card Lifestyle,

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