The Bank of England is poised to increase interest rates this year, despite weak economic growth from the UK. According to a Bloomberg survey, Mark Carney, head of the BoE has urged that an increase will happen regardless. Currently, economic growth has suffered setbacks from earlier forecasts in 2016/17. Falling from 1.5% in January and February to 1.4% currently, declining by 0.3% so far compared to 2017.
This slump is due to a significant level of interruptions the economy faced due to weather conditions. According to The Independent, the disruptions to transport, and a large number of lost workdays contributed to the growth slump. Carney has previously stated that, even with the slow motion speed of the British economy. Steady increases to the underlying interest rate are necessary for longer-term economic recovery.
“We think the momentum in the economy is going to reassert. The Monetary Policy Committee judges that an ongoing, modest tightening of monetary policy over the forecast period will be appropriate to return inflation sustainably to its target.”
Bank of England to raise interest
Carney is outspoken in his call for interest rates to increase, even at this period of fragility. This increase is required as a counterbalance to the ongoing issues with inflation. Inflation has been causing problems for average households due to its ongoing parity with wages this year.
This issue is reflected in a 2.5% slowdown in consumer spending over this first quarter, despite holiday sales. The decrease represents the lowest recorded level since records began on spending, with investment intentions remaining stable.