Prepare for interest rate rise, says thinktank
The National Institute of Economic and Social Research (NIESR) has predicted that the Bank of England (BoE) could raise interest rates as soon as February.
The NIESR warned that any rise must be signalled early enough, using the BoE’s ‘forward guidance’ policy which was designed to make clear any plans for interest rates in the future. Failure to do this could cause economic upheaval and risk the stock market.
Economist Simon Kirby of the NIESR explained that predictions are for GDP growth to slow from 3% to 2.3% in 2015. He said: ‘One thing that will happen as we converge on that policy turning point is if communication is not clear we will see volatility.
‘On past performance there’s potential for some lack of clarity. It’s up to the monetary policy committee (MPC) to be as clear as they can be and clearer than they have been over the last six months’.
He added that the upcoming quarterly inflation report from the BoE will be ‘crucial’ in presenting clear guidance on the outlook for interest rates.