The Bank of England has to continue driving rates higher

In an article that appeared in the Daily Telegraph on January 13th (view article here), I argue that the Bank of England has to drive interest rates higher. Structural changes in the UK mortgage market mean that the transmission mechanism between UK interest rates and the UK economy is weakening. UK inflation is the highest it’s been in more than a decade, and real interest rates (which are what really matter) are still very low. The Bank of England’s raison d’etre is to control inflation, so control inflation it will, even if it means risking an economic slowdown. Rates will therefore have to climb higher.

The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.

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