Bank Of England Economist Warns Of An ‘Aggressive’ Rise In Interest Rates

Thursday, September 23, 2010
By Paul Martin

Vincent Fernando, CFA
Sep. 23, 2010

English inflation has been well above the central bank’s target for four years, though many have excused this away as being due to higher commodity prices globally, an increased value-added tax (VAT), or a weaker British pound. It’s been perceived as a temporary phenomenon, and thus not a concern. Thus the central bank has maintained low interest rates in a bid to stimulate the economy, even though low interest rates usually risk stoking inflation.

Thing is, inflation needs to come down soon, because the notion that it is just temporary is wearing thin explains Spencer Dale, the chief economist at the Bank of England. The second that inflation picks up, and the problem becomes chronic in the minds of worker and consumers, is the moment that England would have to aggressively hike its interest rates.


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