Base rate rise should happen in early 2018, says think tank

Mark-Carney-WEF-700x450.jpg

The Bank of England should raise base rate by 0.25 per cent in early 2018, according to a top economic think tank. 

The National Institute of Economic and Social Research originally recommended a rate rise in Q1 2019 but says the economy has been performing better than forecast. 

The think tank predicts the economy to grow 1.9 per cent next year, from an estimate of 1.7 per cent this year, according to the Times. 

NIESR director Jagjit Chadha says a 0.25 per cent base rate rise should not be seen as tightening economic policy but rather as removing extra stimulus introduced after the 2016 Brexit referendum. 

Last August the Bank cut base rate from 0.5 per cent to 0.25 per cent and raised the amount of bonds bought by the quantitative easing programme by £60bn to £435bn. 

The think tank believes that consumer spending will not be the UK’s main growth driver next year, instead giving way to rising imports and greater business investment.

This week M&G bond fund manager Richard Woolnough warned the Bank of England’s unwinding of its corporate bond buying programme will be more significant than an interest rate rise.