A report by rate setter Kristin Forbes reveals that the interest rates may rise sooner than expected if the inflation rebounds as strong as it is now after the sharp fall recently.

British interest rates may rise sooner

British interest rates may rise sooner

Monetary Policy committee member Forbes said that she predicted that there is a higher probability of scenarios which see deeper falls in inflation may occur in the coming months and it might pick up strongly as predicted before after the falls.
In her speech today she said, “These scenarios, if they occur, would imply an earlier increase in interest rates than currently expected, especially in order to ensure that any subsequent interest rate increases are slow and gradual.”
Since early 2009 after the global economic crisis, the Bank of England has been maintaining low interest rates at 0.5 percent and there are no indications that the financial markets may increase the interest rates before midyear 2016. However, economists who took part in a poll have expressed opinion that the rates may increase at the end of this year.
Since the middle of last year, oil prices have lowered and as a result, Britain’s inflation has seen a 14 year low at 0.5 percent and so the two Bank of England policy makers have dropped their calls for higher interest rates earlier this month.
In an interview today, she said, “Whenever one large developed country starts to raise rates, that is going to be a wake-up call to investors and markets that at least in some economies the era of very low rates, very cheap credit, is starting to come to an end”.
She also said that the inflation might fall down further in the coming months, however, the fall in the price of oil and the growth in the US might increase consumption in Britain which will increase interest rates eventually.