ANY FURTHER interest rate rises will happen “at a gradual pace”, the deputy agent for the Bank of England in Yorkshire has advised.
Writing in today’s The Yorkshire Post Will Holman said the economy “is finally returning to normal” following the financial crisis and, that while further rises are likely, they will remain at a level lower than those seen a decade ago.
Mr Holman said the Bank of England had to balance the rate of interest so as to avoid stifling economic growth or allowing inflation to spiral.
His views come after the Office of National Statistics this week showed inflation came in higher than expected at the start of the year, leading to calls for a hike in from the current 0.5 per cent.
Mr Holman said: “We think the current speed limit of the UK economy is annual growth of around 1.5 per cent but our latest forecast suggests it is on track to grow a bit faster than that.
“So we think it needs a little less support from us. Although the Bank’s Monetary Policy Committee voted to keep rates at 0.5 per cent this month, they also indicated that, if the economy performs as expected, it would be necessary to raise them again to prevent the economy from overheating.
“But they also stressed that any further rises are likely to happen at a gradual pace and to a limited extent. So interest rates are likely to remain substantially lower than a decade ago. This isn’t a case of putting the brakes on; we’re just easing the foot off the accelerator a little. And we’re doing that because, ten years on from the financial crisis, the economy is finally returning to normal.”