While interest rates in the country have risen in the last year, they are still low compared with rates over the past 30 years, argues Congdon.“An interest rate rise is almost certain after an election in Britain. Rates will not peak below 5.5%,” he says. Instead, he forecasts base rates to peak over the next year or two, reaching 5.5% in the fourth quarter of this year. Congdon says higher interest rates may be needed to slow down money growth, which was 8.9% in the year to January, a figure that he says is too high: “Continued 10% a year money growth would lead to annual inflation of more than 5%.” He adds that money growth may not slow down enough if rates peak at 5% or 5.25%. Money supply growth of 10% a year will also result in the money holdings of companies growing by 10-20% says Congdon. This will work to boost asset prices, but will increase output and ultimately raise inflation above the government’s target figure of 2%. Steven Andrew, an economist at F&C Asset Management, agrees that 6% is not generally regarded as a high peak for interest rates: “The notion that you can slow the economy down in a normal cycle with interest rates peaking at 4.75% is unusual in a historical context.” However, even though rates may near 6% in a couple of years’ time, according to Andrew (pictured), there may be some cuts beforehand. Growth in Britain is already slowing and inflation is currently modest, he says. He adds that while money growth is indeed too high, the bank will respond only to any real economic behaviour resulting from money growth, such as over-consumption: “The central bank is very responsive to data. Provided data continues in its current fashion, with retail sales falling, they will see no reason to raise rates above 4.75%.” The Bank of England has held interest rates at 4.75% since last August.