Interest Rates Frozen Again

Interest Rates Frozen Again.

As expected, the Bank of England Monetary Policy Committee met yesterday and decide to keep Bank of England base rates at 0.5%pa.

Base interest rates have been frozen since March 2009.

The new Governor of the Bank of England, Mark Carney, has already confirmed that interest rate setting will now be benchmarked against a target UK unemployment rate of 7%.

We suggest that this is a smokescreen.  The real target is to allow interest rates to bubble below the service for a sustained period to allow inflation over a 5 or 10 year period to devalue the UK’s record public sector debt without ever repaying it.

If inflation starts to run away, which we believe it could in around 2 years, we expect interest rates to increase even if the unemployment target is not reached.