THE new chief economist at the Bank of England has sought to reassure households and businesses that the forthcoming increases in the cost of borrowing will be gradual.
Speaking to The Yorkshire Post, Andy Haldane said: “The most important message that our guidance could provide is that when it does come, whatever the first letter of the month that that happens to be, it’s going to be gradual.
“This is not going to be going up in clips of 50 basis points; it is going to be ever so gradual and even when that normalisation is through and complete, we are not going back to where we came previously.
“The new normal won’t be rates where we thought about them in the past. It is going to closer perhaps to that 2-3 per cent range. Navigating that path won’t be easy. We have never been here before.”
He added: “I understand the sense of trepidation around that, interest rates prospectively on the rise, but this will only happen when we are really confident that the economy can take it. In that sense, the return of interest rates to normality ought to be something to applaud and take comfort from because this is the mirror image of the economy having repaired itself. That’s what we’ll be indicated.
“Right now there aren’t signs of strong inflationary pressures, there aren’t signs of strong wage pressures, which is why we are in no rush and when the rate rises eventually come they can afford to be gradual.
“That ought to be a good news story for the economy. It has proved positive that we are returning to something closer to normality.”
• See The Yorkshire Post on Saturday for the full interview.