The Organisation for Economic Co-operation and Development (OECD) has stated that the UK is going to have to raise interest rates in 2010 in order to control inflation, and it will need to raise interest rates to 3.5% by the end of 2011.
The OECD has approved of the Bank of England's rock bottom interest policy during the recession. However, it implies that the Bank is too relaxed about the current inflationary threat.
As soon as interest rates rise, there will be many more repossessions as many homeowners are already struggling to make ends meet.
The Bank has argued that factors, such as, the VAT increase and higher fuel prices have increased inflation, however, the OECD stated that action is needed in terms of underlying price pressures.
The estimated increase of core inflation to the Bank of England target will necessitate an increase of the policy rate to 3.5% by the end of 2011.
The recommendation is not in accord with the Bank of England which has claimed that inflation, presently at 3.7%, is going to return to the target rate of 2% of its own accord due to the spare capacity in the economy.
Increase in Interest Rates is Going to Mean More Repossessions
Fri, 28 May 2010
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