In the News

Monetary Policy - UK interest rate rise likely before the end of 2021

Graham Watson

12th October 2021

The market consensus is that interest rate rises are on the way, with some people forecasting that they will come before the end of 2021.

It's an interesting time for the Bank of England's Monetary Policy Committee; the inflationary spike appears to be a call-to-arms, and can an interest rate rise be effective at lowering inflation. Arguably, all of the causes of the current inflationary spike are cost-push, and it doesn't seem as though anything that the Bank of England can do would affect this.

However, might it be the case that a rate rise is being used to indicate a willingness to act, in the hope that such a precautionary intervention might reduce the need for significant future rate rises. The Bank is concerned to avoid a significant rise in inflationary expectations among households and businesses.

In other news, UK job vacancies have reached an all-time high - suggesting that there's a whole lot of structural unemployment. It has implications for hospitality and retail and the prospects of the UK becoming a high wage economy.

The simple fact is that many people looking for work lack the factor mobility to enable them to fill these jobs - something that should have been self-evident years ago. However, regional house price differentials and the poor quality of vocational training are likely to mean that it will be difficult to overcome this.

And finally, Larry Elliott reminds us here that 13 years ago the global financial crisis broke, and he uses that as a convenient hook to suggest that we could face another global crisis as a result of the ongoing supply chain issues. Happy days!

Graham Watson

Graham Watson has taught Economics for over twenty years. He contributes to tutor2u, reads voraciously and is interested in all aspects of Teaching and Learning.

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