It didn’t say much that was different, but it was enough all the same. On September 15th 2017, ten years and a day on from the Northern Rock collapse, the UK economy suddenly looks very different.
The Bank of England’s monetary policy committee hasn’t done much in a while. It cut interest rates after the Brexit vote, and ever since then, its members have been sitting on their hands. Well most of them have. Three of the nine voted for a hike earlier this year, but now one of that trio has left, and in the latest meeting the vote went 7:2 in favour of keeping rates on hold.
But yesterday, the minutes from the latest meeting stated: “Some withdrawal of monetary policy is likely over the coming months.” In the world of central banks, things don’t get much clearer than that. Those words are as unambiguous as you get, the Bank of England is going to increase interest rates soon, and for the first time in over ten years.
On September 14th 2007, we saw the collapse of Northern Rock, heralding the beginning of the banking crisis that peaked in 2008. Ten years to the day later, the Bank of England seemed to herald the end of the post 2008 era.
Sterling soared on the news.
Meanwhile, in the US, inflation rose by 0.4 per cent in August on the month before, and by 1.9 per cent year on year, the highest level for some time. The odds of US rates going up soon, have shortened.
And finally, in the US this week, Brian Coulton, Fitch’s chief economist, predicted that US rates will hit 3.5 per cent in 2020.
These are all major developments, the UK and US have become used to record low rates, creating high levels of consumer debt, see Global credit analysts warn of serious UK consumer debt problem and credit crunch concerns. How will indebted consumers cope in an era of rising rates?