Outlook: Interest rates
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.THREE OUT of every four economists think the MPC will vote to raise interest rates tomorrow. Some, spooked by the big jump in house prices last month, predict the increase will be a half point rather than a quarter. Only a few, wary instead of the committee's fondness for springing a surprise, look forward to no change.
Certainly, a lot of the indicators discussed in previous MPC meetings and flagged up in the minutes are pointing to the need for higher borrowing costs. The economy as a whole has recovered faster than anyone expected, and growth earlier this year was higher than first estimated. Growth in the third quarter was well above its long run trend, which is fine for a while but eventually adds to inflationary pressure. House price inflation is meanwhile beginning to spiral out of control.
There are also signs of pressure in the jobs market. With no pause in the downward march of the unemployment total, and many pockets of full employment, earnings growth is accelerating. If it stays above 4.5 per cent, the inflation target will be under considerable threat.
However, even the fiercest hawk would admit that prices are behaving remarkably well for this stage of the business cycle. Signs of inflation would, in the past, have emerged much earlier. It would be silly to dismiss the likelihood that factors such as competition, consumer resistance to price hikes, the exotica of Internet shopping and so on have fundamentally improved the inflationary outlook. Then there is the strong pound, which has done so much to keep costs and import price levels down.
These influences make a split vote on the MPC this time a racing certainty. Still, another small and early rate rise will do little to damage the chances of healthy growth, and would insure against rising inflation in future.
Outlook@independent.co.uk
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments