The newest member of the Bank of England’s Monetary Policy Committee has said that interest rates may have to be cut again to stimulate the economy if inflation does not rise.
Dr. Gertjan Vlieghe said after the latest data from the Office for National Statistics (ONS) that inflation remained “very weak” and Britain was potentially at increased risk from turmoil around the world.
The latest ONS Consumer Price Index showed that inflation dropped from zero per cent in August to -0.1 per cent in September; its joint lowest level since 1960.
Dr. Vlieghe added that despite rates remaining frozen at an all-time low of 0.5 per cent for more than six years, the Bank would have to “wait and see” before increasing interest rates, adding: “We can cut interest rates if we need to.”
Most economists now feel that a hike in interest rates will not happen until at least 2016 and even then they do not expect a rise of more than 0.5 per cent; taking it to one per cent.
This period of low inflation and stagnation in interest rates has made traditional forms of saving ineffective with many high street banks now offering minimal rates on their traditional low or medium risk saving accounts.