BoE Saunders Warns Households to Prepare for Higher rates

Households should prepare for interest rates to rise as the Bank of England withdraws some of the emergency support it injected into the economy in the wake of last year’s Brexit vote, a top policymaker has warned.

Michael Saunders used a Guardian interview to explain why he had voted for a rate rise last month and to emphasise that it was no longer necessary for Threadneedle Street to keep its foot to the floor with record low borrowing costs.

The external member of the monetary policy committee (MPC) said the economy had confounded gloomy forecasts made in the aftermath of the referendum and he warned inflation would climb higher and stay well above the Bank’s target for longer without action.

“I think households should prepare for interest rates to go higher at some point. But if rates do go up, it will be in the context of the economy doing OK and unemployment being low and probably falling,” he said.

Speaking on the eve of the 10th anniversary of the last time the Bank raised interest rates, Saunders rebuffed suggestions that policymakers should hold fire while Brexit negotiations get underway.

“We are not constrained from adjusting interest rates during the Brexit period. There’s no sense that policy has to stay on hold just because Brexit negotiations are under way,” he said.

via The Guardian

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza