A Bank of England policymaker has suggested that UK interest rates could rise in the next year if the recovery continues and rising prices lead to ‘more persistent’ inflationary pressures. Michael Saunders, a member of the Bank’s Monetary Policy Committee which sets rates, told an online session that the economic outlook would determine when interest rates will rise from their current record low of 0.1%. Saunders explained that, if the economy continues to recover, and inflation shows signs of being more persistent, then it might be right to think of interest rates going up in the next year or so. He did, though, add that any rise in borrowing costs will depend on economic conditions. Saunders also predicted that any rise in interest rates in the next year or so should be “relatively limited”, given that the neutral level of interest is much lower than it used to be. It is not clear that we would even need to get back to neutral in that period, Saunders added, in an online event hosted by accounting software package QuickBooks. Inflation dropped back to the Bank’s 2% target in July but is expected to surge to around 4% by the end of this year.

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