First interest rate increase predicted for spring 2015

By Natasha Adamson

Mark Carney, the governor of the Bank of England, has sought to ease concerns that interest rates are due to increase shortly by reviewing his forward guidance policy.

Mortgage borrowers and property purchasers will welcome the comments from Mr Carney, who said that an interest rate increase would not just be linked to a fall in unemployment - expected to reach the previous 7 per cent target in the 2nd or 3rd quarter of this year. He said that the Bank would now look at other factors such as wages, productivity and the output gap. The strong indication was that rates would only have risen to 2 per cent by 2017, and that the increases would be slow and measured.

Chris Williamson, chief economist at Markit says at the current rate of growth in the economy the first interest rate increase is likely to take place in the spring of 2015, rising to 2 per cent by early 2017.

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