Rate Rise on the Horizon?

Statements from the Bank of England’s deputy governor have revived hopes that an interest rate rise could be on the horizon for the UK, and may even be higher than expected.

Interest rate rise?

Ben Broadbent, the BoE’s deputy governor, said that interest rates may have to rise higher than what people and the markets expected in order to try and curb inflation and keep the economy going. He said the UK would now be in a better position to cope with a rate hike.

But nothing has happened…

Just yesterday, the BoE voted 6-2 to keep rates at 0.25 per cent, a position they’ve held since August of last year. It was also announced that the economic growth forecasts would be reduced. Broadbent said that people shouldn’t read too much into a rate rise, but that’s hard to do when it could make such an impact.

Possibilities with a rate rise

An increase in interest rates would mean that your savings would depreciate less, inflation may slow (but not stop – that’s not possible), and could help strengthen Sterling in the eyes of the Foreign Exchange markets.

Would it change much?

These changes may seem small but could have longer term benefits. The problem is that they’re all fickle. An interest rate rise could see the pound fall because pundits may see it as the BoE trying to encourage investors due to low growth. Simply put, a rate rise won’t solve our financial problems.

Time to take control

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