Interest rates could go back up

A member of the powerful Monetary Policy Committee, which votes on base rate changes each month, has recently said that whilst the base rate in the UK has declined rapidly over recent months, falling from 5 percent in October to just 0.5 percent by March, there could also be a rapid climb in the base rate if policymakers decide that this is necessary.

Shock figures showing that CPI (Consumer Price Index) has gone up has raised concerns about inflation levels, and whilst the base rate has been kept on hold for this month, still at an all time low of 0.5 percent, Spencer Dale, chief economist for the Bank of England, said that they could rise again rapidly if it is decided necessary to try and keep a lid on rising inflation.

Dale stated: ‘The committee adjusted monetary policy boldly and decisively on the way down in order to meet the inflation target. And, let me assure you that, when the time comes, we will be prepared to respond with equal vigour on the way back up.’

He did, however, state that whilst the outlook for the economy still looked gloomy at present it could start to look brighter by 2010, stating: ‘As we go through 2009, I believe it is most likely that the pace at which output is contracting will ease and that we will see some signs of recovery by around the turn of this year.’