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Rate rise of up to 3% predicted by early 2020s

A former Bank of England Monetary Policy Committee member has predicted that interest rates could rise to 2 or 3 per cent by the early 2020s.

Now senior economic adviser at PWC, Andrew Sentance (pictured) was speaking at the Building Society Association conference in London earlier today, and also estimated that the UK will lose about 3 per cent of GDP by 2020, compared to where the country would have stood without Brexit.

“Inflation has now caught up with wage growth causing a sharp consumer slowdown,” said Sentance.  “The weak pound has also squeezed consumers and the expectation is that households will adjust their spending.”

However, he said that the UK economy would recover following weakness after the Brexit vote, with “reasonably healthy growth for 2017 and 2018, based on current forecasts.”

But he added that if EU negotiations do not go well, this could “prolong disappointing growth into the early 2020s.”

Sentance told the conference that he believes inflation will rise “to around 3 per cent or higher later this year” and that interest rates “should follow the US policy of gradual rises” to reach 2 to 3 per cent before 2024.

He also estimated that the world economy in 2022 will be three times the size it was in 2000, heading for $100tn, but that the pace of growth will slow.

The Building Society Association conference is a two-day event currently underway at the Building Design Centre in north London.

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