Raising interest rates amidst a climate of trade wars and stalling global trade is a high risk policy, particularly since the pace of economic growth is set to slow in the second half of 2018, argues Chris Williamson
UK policymakers are being accused of playing a risky game, raising interest rates as the global and domestic economies show signs of stuttering and Brexit anxiety looks set to intensify.
The Bank of England’s nine Monetary Policy Committee members voted unanimously to hike interest rates to 0.75% at the August meeting, having already hiked at the November meeting. These were the first two rate hikes since the global financial crisis, 10 years ago.
While the November hike had been widely seen as a simple reversal of the emergency ‘insurance’ rate cut made in the immediate aftermath of the EU referendum, the August hike should be seen as the first properly ‘hawkish’ tightening of policy, something which should be justified by improving economic data and rising inflationary pressures.
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