Fears that the Bank of England will raise its base rate above 0.5% before the end of the year have been calmed by the economist who sparked the rumours.
Speculation that the Bank of England is about to hike its interest rate was fuelled on Wednesday (17 June) when Professor Kristin Forbes – one of the nine economists who decide when rates should be increased – said the “date is coming closer”.
Forbes, one of only two women on the Bank’s Monetary Policy Committee, made her comments after the Office for National Statistics revealed that wages climbed by 2.7% in the year to April, the fastest pace since February 2009.
But later in the day she added: “We still do have some time before interest rates need to rise. Growth in productivity will be key to how wage growth impacts inflation.”
Housebuilder Berkeley Group Holdings says a rise in the Bank’s base rate could help ease pressure on soaring house prices in the capital.
Berkeley finance director Richard Stearn told City AM newspaper: “There’s an argument to say that a little bit of an increase in interest rates might help reduce the price inflation that we continue to see. With interest rates so low, I think that is feeding a little bit of the price inflation that we see.”
Shares in Berkeley, which delivers about 10% of all new homes in London, rose 10% this week after it reported a 42% increase in pre-tax profits to £539.7m in the year to 30 April.