Anthony Hilton: Raising interest rates would boost confidence
Rates close to zero remind us the authorities think we are still in crisis, which saps confidence
I don't think the financial system works when interest rates are zero. There is no incentive to save, which means organisations like building societies cannot attract funds. Thus they have no money to lend, prolonging the stagnation in the housing market. Individuals with savings, particularly the elderly, endure real hardship as their income collapses Companies which should in theory be tempted to invest when money is so cheap don't do so because they are worried about everything else and have no confidence in the economic outlook. Above all, rates close to zero are a constant reminder that the authorities think we are still in crisis, and this saps confidence.
I am tempted to think that raising rates might be a better solution because people would interpret it as a return to normality.
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