UK interest rates have been held at 0.5 per cent since March 2009 and the Bank of England (BoE) Governor, Mark Carney, believes that the country will remain a “relatively low interest rate environment”, even with a potential rise in rates. He has remained vague on when such a rise may occur. Kirstin Forbes, an external member of the BoE’s Monetary Policy Committee, claims that due to the improving state of the UK economy, the next move in interest rates will certainly be an increase.
Mr Carney informed MPs that the BoE is concerned about the repercussions of consistently low interest rates, in particular the effects on the property market. The Governor highlighted that this market may experience excessive risk taking, at a time when the weight of household debt means that there is less of a margin for error. Additionally, Mr Carney claims that productivity is unlikely to fall short of the BoE’s latest forecasts, it is more likely to exceed them, therefore reducing pressure on inflation.