What next for interest rates?

Earlier this week, Andrew Sentence, a former member of the MPC argued for an increase in UK interest rates, pointing out that we are in our 7th year of recovery, with unemployment at 5.7%, close to the 5% thought by many economists to be the “natural rate”. He focussed on the size of the balance of payments deficit – a record 5.5% of GDP last year, as a future problem. The trade in goods and services is not the issue which is declining  as a % of GDP; the problem is the fall in our net investment income (interest profit and dividends from overseas) because of poor performance in the rest of the EU.

However the MPC appeared not to have listened, opting to keep interest rates constant, thereby keeping them  at their current record low level for  the longest period ever. have



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