Outlook: Rates on the up?
Friday 07 May 1999
Not very, seems to be the answer. The chances are that interest rates in the UK have reached their low point for the time being, despite the strong pound. The irrepressible rise of the currency is a symptom of the underlying strength of the economy. Investors want to buy British because UK growth prospects are good against lacklustre Europe.
In a modest version of the phenomenal success of the US in combining continuing growth with low inflation, the British economy is bounding out of the shadow of a mild slowdown with little immediate risk to the inflation target on the horizon.
But as Alan Greenspan, chairman of the US Federal Reserve, pointed out with respect to the US in a speech yesterday, continuing expansion does pose a threat of eventual inflation. He signalled that the Fed will, sooner or later, have to raise US interest rates. The MPC too will have to start looking out for warning signs of higher inflation. Much as it annoys those manufacturers struggling to hang on to export markets to hear it, the rest of the economy is expanding again. Their loss of business is being outweighed in the aggregate by the gains in financial services and IT.
And this is before the recent run of interest-rate reductions has had its full impact on the economy. Research published last week by the Bank of England showed that a rate cut takes a year to have its maximum impact on output. On this model, the full benefits of the rate reductions that started last year won't come through until this autumn, when recovery will already be well under way.
If the MPC matches on the way up its activism in bringing rates down, it will be in for a rough ride from the manufacturing lobby. But the rest of the economy should be thankful for a soft landing, even if this is as low as interest rates are going to get.
- 1 Bill Clinton portrait features Monica Lewinsky reference, artist admits
- 2 Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
- 3 Pornhub turns masturbation into energy in bid to save the planet
- 4 Have sex with your iPad thanks to the new sex toy no-one asked for
- 5 Average penis size revealed: Scientists attempt to find what is 'normal' to reassure concerned men
Bill Clinton portrait features Monica Lewinsky reference, artist admits
Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
The 'sex selfie stick' lets you FaceTime the inside of a vagina
Kanye West gives guest lecture at Oxford University: 'If I, Kanye West, can remove my ego, I think there's hope for everyone'
'This is what Islam tells us to do': A rare glimpse inside a Saudi Arabian prison – where Isis terrorists are showered with perks and privileges
New theory could prove how life began and disprove God
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
This is what it's like to be dead, according to a guy who died for a bit
Ukip would cut billions from Scottish budget to fund English tax cuts
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
End of the licence fee: BBC to back radical overhaul of how it is funded
iJobs Money & Business
£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...
£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...