Bank warned against base rate hike - Economy - News - Moneyfacts


Bank warned against base rate hike

Bank warned against base rate hike

Category: Economy

Updated: 09/03/2011
First Published: 09/03/2011

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

the Bank of England has been warned against rapidly increasing interest rates ahead of Thursday's base rate decision announcement.

Research from Willis Owen found consumer confidence over the outlook for the UK has plummeted over the past year.

With spending set to fall as a result, the discount broker has told the Bank it would be a mistake to raise interest rates quickly in an attempt to bring inflation under control.

The survey found that half of people are less confident about the outlook for the UK economy than they were in February last year.

By comparison, just over one in six of the population claim to be more confident.

As a result of the rising pessimism, more than four in ten people plan to spend less in 2011, with just 2% planning to spend more.

"The danger is that we end up in a downward spiral with falling confidence and consumer cutbacks sinking the economy still further," said Alan Easter, director of the firm.

"This should serve as a clear warning to the Government and the Bank of England that any further shocks to the economy will send consumers even further into their shells.

"While it may not be good news for those with cash savings we need to continue this period of low interest rates, for at least the next 12 months."

The research found that confidence amongst the older generation has been particularly hard hit, with the combined pressure of rising inflation and low interest rates affecting those with savings the most.

"Those close to or in retirement are often reliant on additional income from their savings, which in the current environment it is not delivering," added Mr Easter.

"Research also shows that the over 50s feel the effect of inflation most - that is one reason why we are seeing people in their 50s and 60s continue to invest in a range of funds this ISA season.

"With people living longer in retirement more people understand it may not be the best idea to just keep all your money in cash and live off the interest."

If you're searching for an equity ISA, a product such as the Baillie Gifford Investment Trust ISA will be able to provide you with access to a vast range of investments and fund choices.

For prospective investors who are perhaps a little unsure as to where to invest, a provider such as Skipton Financial Services will be able to help.

They can compare over 1,100 ISAs and funds from over 60 providers – if you need help in choosing the right investment, call Skipton Financial Services free on 0800 731 5342

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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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