Britain is not going to raise interest rates any time soon, even though the US Federal Reserve hiked rates for the first time since 2006.
That’s according to the former Prime Minister John Major on BBC’s Andrew Marr Show this morning.
“The Fed have just ticked up interest rates a little,” said Major on the BBC programme.
“I think this will be a very slow process. I don’t think we’re going to suddenly see a huge spiral in interest rates. I know many mortgage owners in particular will be concerned about that.”
The US Federal Reserve voted to raise interest rates for the first time in 9 years late on Wednesday this week. The world expects central banks globally to follow the US’ lead and raise interest rates within the next year. It would bring an end to a period of record low interest rates around the world, sparked by the 2008 financial crisis.
Britain has kept interest rates at a record low of 0.5% since March 2009. This has stimulated the economy because it lowers the cost of borrowing. In other words, it helps those in debt to make repayments and boosts the amount of money in people’s pockets.
Many economists predict that the BoE will raise rates in late 2016. However, forecasts keep being pushed back.
The time when rates will rise is one big guessing game. Bank of England governor Mark Carney once said in a speech back in July that the BoE was looking to raise interest rates “at the turn of this year.” However, after much speculation, BoE’s deputy governor Ben Broadbent then said that the central bank will not pre-announce a date for a rise.
While, a number of economists have started to publicly call for a rise in rates soon, Carney recently said several times that rates will stay low “for some time.”