Interest rates highly unlikely to rise before Christmas, former Bank of England policymaker says
Interest rates are highly unlikely to rise before Christmas, a former Bank of England policymaker has said.
Andrew Sentance, who was on the Bank’s Monetary Policy Committee from 2006 to 2011, all but ruled out what he called a ‘Scrooge’ rate hike in December.
The City had been pricing in a rise from 0.1 per cent to 0.25 per cent in December and then to 0.5 per cent in March next year.
Rise: The City had been pricing in a rise from 0.1 per cent to 0.25 per cent in December and then to 0.5 per cent in March next year
But Sentance said it was far more likely that interest rates would start to rise in February.
He told The Mail on Sunday that, while at the Bank, he conducted research into the history of interest rate rises in December and found they were ‘rare’.
‘In my first Christmas on the committee, I did a review of when interest rates had risen before Christmas,’ he said. ‘Is it going to be Santa or Scrooge? It would be quite unusual for them to start raising rates just before Christmas.
‘Realistically, we’re going to have to wait until the beginning of February for anything substantive.’
Sentance was known as a ‘hawk’ in support of rate rises while at the Bank and said it was important rates did start to increase soon. However, he said 1994, when Ken Clarke was Chancellor, was the last time rates jumped in December.
There have been no rate rises in December under the Monetary Policy Committee, created by Gordon Brown in 1997. There were cuts during the financial crisis in December 2007 and 2008.
If the Bank did increase rates before Christmas, it would add costs to households which already face rising prices across the economy, from fuel to Christmas toys, as supply chain woes and shortages bite.
Sentance, now senior adviser to consultancy firm Cambridge Econometrics, said: ‘The reason I’m being cautious about what the MPC might do is because nobody on that committee has yet voted for a rise in interest rates.’
He said it might be too tight for the MPC to take into account Rishi Sunak’s October 27 Budget in its inflation forecast at its next meeting on November 4. ‘So it would be quite a shift if, in the next meeting or two, they did actually bite the bullet [and increase rates],’ he said.