Don’t panic – keep calm and carry on!
Don’t panic! Don’t panic! There’s been a lot of talk about interest rates going up but there’s no need to panic just yet.
The speculation has come after Bank of England governor Mark Carney said in a speech that interest rates could rise ‘at the turn of this year’.
But as ever the devil is in the detail; it’s important to note that he clearly said that once rates start to rise, they would go up slowly in small increments.
And even when they did go up, they would only rise to about 2% or 2.5% over a three year period – representing the new norm rather than the 4%, 5% or even double digit figures we have seen in the past.
So, realistically we are probably looking at a 0.25% or, more likely, a 0.5% rise at the end of the year or start of next year.
Of course, this would have different impacts on different people depending on their circumstances, but it does represent some confidence that we are returning to some kind of economic normality after the Great Recession.
Mr Carney knows that any higher increase could destabilise the property market and the wider economy.
Clearly, he has flagged up the rise to give prior warning so any increase doesn’t come as a total shock.
It falls into his policy of forward guidance although he has backtracked on forecasts before.
Indeed, minutes released today from the Bank’s monetary policy committee , which sets rates, showed that members were unanimous in deciding to leave rates unchanged at their last meeting.
In addition, a lot could happen between now and December, and Mr Carney has wisely added the proviso that it does depend on any economic shocks.
The world is still an unstable place – not least with the Greek crisis – so we may see some revision of timescales between now and the end of the year.
Mr Carney may also decide that Christmas is not the best time to be introducing rises at the busiest time for consumer spending.
So the message is don’t panic – keep calm and carry on!
Don’t panic! Don’t panic! There’s been a lot of talk about interest rates going up but there’s no need to…