Hot on the heels of yesterday’s announcement that GDP was up by 0.8 per cent in Q3 – better than expected and the fourth quarter in a row that the figure rose – the Daily Telegraph tells us that now interest rates could rise faster than previously thought from the 0.5 per cent at which they’ve been held by the Bank of England since March 2009.
It says little change had been expected before the end of 2011 but that following the strong showing from GDP, some traders are predicting two rate rises over the coming months, with a base rate of at least one per cent by the end of the year.
And it quotes Andrew Sentance, a member of the Bank of England's monetary policy committee (MPC), as saying: "I am in favour of gradually moving interest rates up from their very low level, which I think can be done without disrupting business or consumer confidence.”
Nobody doubts that getting the balance right between interest rates and inflation is a tough call.
But at the risk of repetition, the focus will be very much on the private sector over the coming months and years to drive the recovery and create jobs.
And the Federation of Small Businesses (FSB) says that those firms that use the banks as their main source of finance are being penalised by high interest rates, despite the base rate sitting at an all time low.
So they are hardly likely to welcome even a 0.5 per cent rise over the next 12 months, at a time when the FSB’s latest quarterly survey, published earlier this month, found that 10.4 per cent of firms expect to decrease employment over the next three months as business confidence in future prospects and revenue growth weakened during the third quarter.
The MPC’s nine members have a huge responsibility on their hands in nursing the economy back to full health. We can only hope that the decisions they make over the coming months will be the right ones.
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