Neil Craven for The Mail on Sunday
Economic data expected this week is likely to build the case for an interest rate rise as soon as November.
Bank of England Governor Mark Carney said on Friday he expected rates to rise in ‘the relatively near term’ and that it was time for the Bank to ‘ease its foot off the accelerator’.
Capital Economics, a research consultancy, said the purchasing managers’ index for the manufacturing and services sectors, which are released tomorrow and on Wednesday respectively, are expected ‘to maintain their recent upbeat tone’ on the state of the economy.
BoE Governor Mark Carney said he expected rates to rise in ‘the relatively near term’
That and an announcement later this month of continued buoyancy in consumer spending, boosted by inflation, may pave the way for a decision to raise rates, experts say.
A quarter point rise would be the Bank’s first action on rates since the base rate was cut to 0.25 per cent in the wake of the Brexit vote last year
But Carney is conscious of the effect on indebted consumers, who may find the squeeze on incomes too much. He said: ‘We’re worried about a pocket of risk – a risk in consumer debt, credit card debt, debt for cars, personal loans.’
Andrew Wishart at Capital Economics said a rise could help Britain’s low productivity issue albeit at a cost to weaker firms. He said some had only survived as rates were so low and would be unprofitable if borrowing costs were higher.
A rate rise could stop unproductive firms hogging good workers, who would move on to find employment at more efficient companies.