Economists Warn Against Interest Rate Rise

The Bank of England is being urged to keep UK interest rates low despite pressure from the recent VAT increase, the BBC reported on Monday.

The Ernst & Young Item Club, influential economic forecasters, have warned that an increase on the current 0.5% base bank rate could have serious consequences on the UK’s economic recovery.

Peter Spencer, the Item Club’s chief economic adviser has urged the Bank of England to ‘hold its nerve,’ despite inflationary pressures.

“If the Bank has been pushed into a rate rise this year it will find itself with a depressed economy, a low rate of inflation below target, and of course having to cut interest rates,” Mr Spencer told the BBC, “That would seriously damage its credibility.”

It is thought that the Bank of England is under pressure from the government to raise rates in response to the recent VAT increase and rise in commodity prices.

Deloitte, the leading accountancy and consulting firm, also sided with the Item Club stating that too much fiscal tightening could result in a delayed economic recovery for the UK over the coming years.

Explore posts in the same categories: Economy, Finance

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