The Governor of the Bank of England, Mark Carney, has said interest rates could rise before the 2015 General Election. They have been at 0.5 percent for five years, but Carney said it would be a “welcome time” when rates rise from the low level caused by the financial crisis.
Mr Carney was positive about the economic outlook, but any rate rise would push up the cost of mortgages, causing a headache to David Cameron. However, it will be welcome news to savers, who have lost £300billion in interest.
Six months ago the governor set a target of unemployment falling to 7 per cent before he would consider a rate hike. But he was forced to admit that the Bank’s prediction – that this target would not be hit until 2016 – was “woefully wrong”. In fact it has been hit already.
Also, Martin Weale from the Monetary Policy Committee, suggested it would be “difficult” for rates to increase during the election campaign. But Carney insisted the timing of an increase would not be affected by politics.
He told the Treasury Select Committee: “When the time comes, a welcome time to raise rates, we expect it to be gradual and the degree to be limited.
The Conservatives will be hoping for no increase in the rates until after the election, to ensure a strong recovery in the housing market.