UK interest rates should rise next year, says OECD

25th November 2014


The Bank of England should put up interest rates in mid-2015 in order to keep the UK economy in check, the Organisation for Economic Co-operation and Development (OECD) has urged.

The Paris-based think tank said that a strong jobs market is pushing up wages and inflation and called for tighter monetary policy.

It said that increasing rates from their record low of 0.5% would be help to secure more stable earnings growth and productivity in the future.

The OECD said: “Growth has been propelled by high job creation and is set to continue at a strong pace in 2015 and 2016, underpinned by robust private consumption and investment.

“With slack narrowing, inflationary pressures are projected to pick up gradually. Accordingly, the stance of monetary policy is assumed to begin to normalise in mid-2015 to contain inflation.”

It predicts the UK economy will grow by 3% in 2014, making it the fastest growing G7 economy.

It reduced its forecast for UK growth to 2.7% in 2015, from 2.8% in September. In 2016 it projects that growth will slow to 2.5% .

But it said that Britain may stand to suffer as a result of currency wars being waged by other major

It added: “Higher interest rates associated with the economic recovery could support stronger productivity growth by encouraging the selection of more profitable projects and the restructuring of loss-making companies.

“Labour productivity would also be strengthened by further structural reforms to improve loan availability, reduce mismatches in the labour market and further upgrade infrastructure. “

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