The direction of UK interest rates remains unclear but the higher cost of imports is likely to weigh on incomes and consumption in the coming months, said Bank of England Governor Mark Carney.
Speaking at the London School of Economics last night the governor outlined the tension between consumer strength supported by the low cost of credit and the stock markets’ low expectations for the UK.
He said: “Evidence from the past quarter century across a range of countries suggests episodes of consumption-led growth tends to be both slower and less durable. This is because consumption growth eventually outpaces earnings growth, increasing debt and making demand more sensitive to changes in employment and income.”
Consumer borrowing has accelerated notably. In the year to November, total household borrowing rose 4%, and consumer credit rose over 10%, the fastest rate since 2005.
“How household spending evolves, and the inter-temporal trade-off that households strike, will be important considerations over the next year,” said Carney.
After seven-and-a-half years at 0.50%, the Bank cut base rate to 0.25% in August last year simultaneously launching the Term Funding Scheme available for four years.
Prime Minister Theresa May gave her first policy speech on Brexit today and promised to take Britain out of the EU single market. The pound hit a session high of $1.2342, up 2.5% keeping its momentum after she spoke of a “balanced approach” to Brexit during her remarks.
Victoria Hartley is contributing editor at Mortgage Solutions, Specialist Lending Solutions, Your Money and Your Mortgage at London-based publishing company AE3 Media.
She has an MA in Radio from Goldsmiths after gaining a 2:1 in a Comparative American Studies BA at Warwick University. She also holds a TEFL qualification and taught overseas in Mexico and Japan from 1994 to 1997.
Her role includes editorial oversight of the news, analysis and features, event content management and strategic and editorial consultancy for the AE3 Media group. She is an experienced video, broadcast and live-event host and regularly chairs web and podcast debates and interviews.
Multiple award nominations have resulted in two wins: Santander Media Awards, trade journalist of the year and Headlinemoney Awards, mortgage journalist of the year (B2B). Here is one of the award-winning pieces: https://www.mortgagesolutions.co.uk/news/2011/07/21/exclusive-tale-bailey-fraud-witness/
Previous roles include editorships of Mortgage Solutions, consumer title What Mortgage and trade title Credit Today as well as a stint freelancing for a variety of outlets including The Guardian and Which? Money.