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Lloyds Bank: Interest rates may go up quicker than markets expect

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  • 21/06/2018
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Lloyds Bank: Interest rates may go up quicker than markets expect
Lloyds Bank expects interest rates may rise quicker than markets currently predict, but they will stay near historic lows.

 

Earlier today the Bank of England Monetary Policy Committee (MPC) voted 6-3 to hold its Base Rate at the current 0.5% level.

Speaking at the National Association of Commercial Finance Brokers (NACFB) Commercial Finance Expo 2018 yesterday, Lloyds Bank senior economist Rhys Herbert said rates were likely to only rise once this year.

“We think there’s a high chance that UK rates will go up in August,” he said.

“And we think there will only be one rate rise this year but there will be another rise next year and another one in 2020. And the risks, if anything, are on the high side.

“There’s obviously a few things which could derail that, including the Brexit negotiations, or if President Trump puts a spoke in the global economy.

“But overall we think that if the risks go up that they go up a bit more quickly than markets expect as well.”

 

Risk of wage growth

Herbert noted that there were a number of factors which suggested rates would go up, albeit slowly while remaining at low levels by historic standards.

“We think the risk is wages will start to pick up and increase inflation,” he said.

“I think this is the number one concern for the Bank of England. We think they were not that concerned about inflation going up for international reasons.

“They would be more concerned if inflation started to move up because of domestic economic conditions,” he added.

But overall, despite the wide range of uncertainties, on balance the lender believes it is a rising interest rate environment.

“Rates won’t be as low over the next five years as they have been the previous five and you need to bear that in mind when planning,” he added.

 

 

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