Interest rates will rise in April 2015!

The bank of England will announce a rate increase of probably a quarter of one per cent in April next year. The bank have made it clear that they want to see a sustained period of recovery, and all the indications at present look encouraging.

Before any increase in interest rates I believe that they will consider a twelve month period of sustained growth a good indication, which would mean no increase this year.

Unemployment figures are already at 7.1% and we see no reason why this reduction in jobless figures should not continue, so will probably stand at 6.5% early next year. More people will be in employment than ever before so revenue to the exchequer will improve. With a looming election the Conservatives will be keen to reward “ Britain’s hard workers” with some tax cuts. At long last we should be entering a period of confidence in the future of the economy.

Encouraging news from industry

Our motor car industry is receiving substantial new investment and we are becoming a major world player in automotive production again. Also new investment from Pension Funds have helped to increase the house building market and there is evidence of house price increases right across the country.

The bank will keep a careful eye on growth, want to maintain inflation at 2% and keep a very careful eye on wage increases. Any suggestion that wages or inflation are increasing beyond their projected guidelines will force the Bank to move and increase interest rates.

I believe that this will be the scenario in the spring of next year when wage increases and inflation will dictate the speed and rate of any increase. In March we will have the latest economic figures and employment statistics which I believe will trigger a small, but meaningful, increase in interest rates in April 2015.

There is no doubt that action taken by the bank many months ago by holding rates low and quantitative easing have helped to put Britain in the forefront of the recovery, but it does demonstrate that it does take a long time for these alterations to work through the economy and show their effect.