Economists urge Bank of England to postpone interest rate rise

Morning Wire’s panel of economists urged the UK’s rate-setters to keep interest rates at their record low of 0.5 per cent this month, as the global economy slows and inflation remains well below its two per cent target. 

 

Professor Steve Keen, head of the school of economics, history and politics at London’s Kingston University, wants the Bank of England (BoE) to consider further easing until debt levels fall to more manageable levels. 

 

Another concern was a weaken­ing in the UK’s growth over the past three months, as shown in business surveys. Henderson’s Simon Ward said long-run prospects for inflation are strong given broad liquidity growth.

 

This counts cash and bank deposits as meas­ured by the BoE’s M4x plus deposits at the National Savings and Investments bank, which have grown strongly this year on the introduction of George Osborne’s pensioner bonds. 

 

Hold rates. The private sector continues to de-lever from peak debt of 200 per cent of GDP in 2009 to 160 per cent now, and demand will remain subdued while this continues. Interest rate policy is ineffective in this debt-deflationary environment. People’s Quantitative Easing should be considered to reduce private debt levels without causing a recession.

 

Raise. Too loose monetary policy is leading to capital misallocation. Time to normalise – the economy can take it.

 

Raise. Broad liquidity growth is up to over six per cent, the fastest since 2008 and incompatible with the inflation target.

 

Hold. Weaker economic news from the UK and abroad alongside continued market uncertainty suggest no need to change policy this month.

 

Hold. The world economy is slowing down. Manufacturing and services are weakening and the Eurozone is seeing deflation.

 

Hold. The economy’s recovery is faltering, deflation is imminent and even the US Federal Reserve isn’t tightening yet.

 

Hold. Despite continued UK growth, price inflation is zero and global risks are high. Economic conditions do not warrant a rate hike.

 

Hold. As anticipated, UK data softened in the third quarter due to global weakness. Wait for a fourth quarter pick-up before considering a rise.

 

Hold. Signs of a further loss of momentum in the domestic economy, alongside the deteriorating global backdrop, warrants unchanged policy.