Jump to content
House Price Crash Forum
Sign in to follow this  

John Gieve - Rates Are Too Low

Recommended Posts


Rates too low, Bank deputy says

The Bank is expected to raise rates at its next meeting

UK interest rates are too low and are helping to drive demand for loans and credit, Sir John Gieve, deputy governor of the Bank of England, has said.

Speaking in Guildford, Surrey, Sir John explained why he was one of four rate setters who voted to raise interest rates at the Bank's last meeting.

Rates are at 5.5%, their highest in six years as inflation has quickened.

However, business leaders warned that consumers were already feeling the pinch as retail sales growth slowed.

According to the Confederation of British Industry, its latest retail sales survey had a reading of 17 in June, down from 31 in May.

That was the lowest reading since November, and came as poor weather also kept people away from shops and retailers.

"This survey shows consumers are reining in their spending in response to higher borrowing costs," said John Longworth, head of the CBI's survey panel.

'Sharper slowdown'

Many analysts are forecasting that the Bank will raise interest rates to 5.75% next week, after holding them in June.

Some analysts predict that interest rates will hit 6% by the end of the year. One of the main forces behind price growth has been the low cost of loans and debt, which has helped to finance spending by consumers and companies.

"I voted for a further increase earlier this month partly because I was not convinced that current rates would be sufficient to bring credit growth and nominal demand back to their long-term sustainable path," Sir John said.

"I also felt that the impact of moving too slowly on the credibility of the regime and thus the future prospects for the economy was of greater concern, given the robust rate of growth, than an unnecessary slowdown in activity," he added.

Sir John noted that there was a risk that "we may increase interest rates too fast or push them up too far, with an unnecessary loss of growth".

However, he also warned that "we may raise rates too slowly with a cost in higher inflation and potentially higher interest rates and a sharper slowdown in the end".

'Nervous market'

Meanwhile bank Northern Rock said there was "an adverse interest rate environment".

The comments by the UK's eighth-largest lender sparked fears that other banks also would feel a rate squeeze.

Northern Rock's shares were 97 pence lower at 850.5p during morning trading in London.

"Today's effective profit warning, which has battered the share price in an already nervous market, could hardly have come at a worse time," said Richard Hunter of Hargreaves Lansdown Stockbrokers.

Share this post

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 356 The Prime Minister stated that there were three Brexit options available to the UK:

    1. 1. Which of the Prime Minister's options would you choose?

      • Leave with the negotiated deal
      • Remain
      • Leave with no deal

  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.