LLoyds TSB comments on interest rates
Chief economist at Lloyds TSB Corporate Markets, Trevor Williams, said:
“The Bank of England is facing the unenviable task of having to fix two different problems with just one policy tool. The UK economy is slowing; both manufacturing and services activity are showing signs of feeling the pressure and consumer confidence is fragile. At the same time, price inflation - which is already high - is likely to rise further before it peaks.”
“By holding rates, the Bank of England has made the best it can of a very difficult decision. The UK hasn’t yet reached recession, but the worry is that raising rates could trigger this. Equally, not raising rates could risk even higher inflation later on. The best option is to wait until the inflation picture becomes clearer. Importantly, this means ensuring that inflation is past its peak - or risk further elevating inflation expectations - before considering in which direction rates should move next.”