HARD-pressed households could be squeezed even further after warnings of interest rates hike that will go ahead sooner and faster than predicted.
Policymakers in the Bank of England Monetary Policy Committee (MPC) yesterday unanimously voted to leave rates unchanged at 0.5 per cent.
But governor Mark Carney hinted that there would be interest rate rises “earlier” and by a “somewhat greater extent” to deal with a stronger-than-expected growth in the economy.
Economists have said this would leave the door open to a potential rate hike as soon as May, with markets also now pencilling in more than three hikes within three years. The increase will place more pressure on households which continue to be squeezed by poor wage growth and falling inflation.Mr Carney did say the exact timing of future hikes, stressing the rises would be limited and gradual.
He said that the UK will not return to interest rate cycles “experienced in the past”, when historically there were two rises a quarter and borrowing costs stood at 5 per cent on average.
He added: “We are not talking about going back to those levels or that historic pace.”
The value of the pound surged more than one per cent against the US dollar and Euro in reaction to the comments made by the bank.
Suren Thiru, head of economics at the British Chambers of Commerce, said: “If UK economic conditions do become more sluggish, we would caution the MPC against raising interest rates in the near term to avoid weakening business and consumer confidence.”
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